Industrial development in Russia: the study of sectoral structure

Bryantseva Ol'ga Sergeevna ORCID: 0000-0003-0195-8694 PhD in Economics Junior Research Assistant, Institute of Economics, Ural Branch of the Russian Academy of Sciences 620014, Russia, Sverdlovsk region, Yekaterinburg, Moskovskaya str., 29, office 516 briantseva.os@uiec.ru

Introduction

The current geopolitical transformations have a powerful impact on the state of the Russian Federation's economy, causing the need to strengthen its internal stability, increase efficiency, strengthen security and independence from external influences. In this regard, the analysis of the development of the sectoral structure of the economy helps to identify the main factors of sustainability, determine the directions of further development, and identify vectors of structural transformations. The continuity of the process of transformation of the sectoral structure is recognized as obvious, but its essence and orientation causes serious discussions in Russian scientific and political circles. The purpose of this stage of the study is to study the changes that have occurred in the industrial structure of Russia over the past decades.

The concept of "industry structure" goes back to the definition of the economic concept of "industry", since the term "structure" is generally scientific and is understood as a structure, an order, i.e. characterizes the internal structure of any object of study. The structure is also understood as a set of stable connections of an object, ensuring its integrity and identity to itself, i.e. the preservation of basic properties under various external and internal changes. The history of the study of the sectoral structure reached great proportions during the construction of the communist system in our country, since it served as the basis for industrialization and the formation of a socialist way of economy. ^[1] It should be noted that particularly important attention was paid to the development of mechanical engineering, and the enlarged division of the sphere of the national economy into heavy, light industry and peasant farming was also emphasized.

Development of methodological approaches to the allocation of industries

The theoretical basis for the allocation of branches of the national economy was the Marxist-Leninist doctrine of the social division of labor and its forms. Marx distinguished three forms of division of labor: general, private and individual. As a result of the general division of labor, divisions into large genera such as industry, agriculture arise, as a result of the private division of labor, more specialized activities (industries) such as mechanical engineering, weaving are isolated, and a single division of labor occurs due to the specialization of production processes within the enterprise. Branches of the national economy were defined, for classification purposes, as qualitatively homogeneous groups of economic units characterized by special production conditions in the system of social division of labor and playing a specific role in the process of expanded reproduction. ^[2] The national economy was primarily divided into the sphere of material production and the non-productive sphere. The identification of industries and their classification were necessary to achieve a number of important goals and objectives, namely:

1) calculation and accounting of the most important macroeconomic indicators, such as social product, national income, levels and growth rates of industries producing means of production and consumer goods, the relationship between branches of material production and the non-productive sphere;

2) drawing up balance sheets for the distribution of labor resources by areas of labor application;

3) accounting and control of the development of new industries in order to manage scientific and technological progress and economic development;

4) planning the optimal structure of social reproduction, ensuring an increase in the level of well-being.

  The normative base for the definition of industries was the reference book "All-Union classifier of "Branches of the national Economy" (OKONKh)", approved by the State Statistics Committee of the USSR, Gosplan of the USSR in 1976. OKONKH is a grouping of activities by industry, differing in the nature of the functions they perform in the general system of social division of labor. The sphere of material production includes all types of activities that create material benefits in the form of products, energy, in the form of moving goods, storing products, sorting, packaging and other functions that are a continuation of production in the sphere of circulation. The remaining types of activities, in the process of which material benefits are not created, form in their entirety a non-productive sphere of activity. An industry is defined as a set of enterprises producing homogeneous products, or a set of institutions, organizations associated with the performance of certain public functions. The fundamental point of classification for reproduction purposes (which today we would call economic sovereignty) was the division into production of means of production and consumer goods, which ensured accounting and control of the implementation of the law on the outstripping growth of production of means of production, compared with the production of consumer goods.

The OKONKH directory was completely out of use by 2003 and was replaced by the new "All-Russian Classifier of types of Economic Activity" (OKVED) OK 029-2001 (approved Resolution of the State Standard of the Russian Federation dated 6.11.2001), which marked the transition to new conditions of economic accounting in the country that meet the needs of a market economy. The OKVED was developed with the aim of harmonizing statistical accounting in the Russian Federation and international statistics based on the recommendations of the European Economic Community, the International Monetary Fund, the Organization for Economic Cooperation and Development, the United Nations and the World Bank. In the OKVED, the objects of classification are not industries, but types of economic activity. It is explained that economic activity takes place when resources (equipment, labor, technology, raw materials, energy, information resources) are combined into a production process aimed at producing products (rendering services). Economic activity is characterized by the costs of production, the production process and the output of products (services).

The principle in this approach to classification was the separation of statistical accounting by types of economic activity, and not by types of main products or services, the abolition of the concept of industry in the classifier, a change in wording when the manufacturing class replaced industry. The classification of activities by sections, subsections and classes is based on a three-sector model of the economy, which was studied in the works of Fisher A. ^[3] and Clark K. ^[4], where the primary sector is extractive industries and agriculture, the secondary sector is manufacturing and construction, and the tertiary sector is the service sector in in its broadest sense. The predominance of the tertiary sector in the economy in developed countries, as is known, marks the transition to a post-industrial economy. The tasks of the OKVED classification include the implementation of state statistical observation and international comparisons based on statistical information.

In 2014, the OKVED-2 handbook was put into effect ("The All-Russian classifier of types of economic activity OK 029-2014 (KDES Ed. 2)". (approved by the Order of Rosstandart dated 01/31/2014 N 14-st). The innovations of the OKVED in the second edition concerned the distribution of economic activities within classes and groups, the appearance of additional classification features such as "scope of activity", "production process", "raw materials used", the issues of the Central Bank's activities were corrected. New subsections have appeared in the Manufacturing Industry section, including subsections 21 (Manufacture of medicines) and 26 (Manufacture of computers, electronic and optical products). An important innovation was the formation of a new section J that meets the requirements of accounting for the information economy: "activities in the field of information and communications." Thus, with the introduction of the OKVED, such classification categories as "industry" and "industry" officially ceased to be used for accounting purposes. However, they have not disappeared from economic and regulatory practice.

It should be noted that the OKVED is the basis for calculations of the system of national accounts, which is aligned with the "International Standard Industrial Classification of All Types of Economic Activity" (ISIC) and represents the United Nations industrial classification system. In the fourth edition of the ISIC, the concept of industry is still present and corresponds in the English version to the term "industry". It is indicated here that a set of statistical units falling into one ISIC classification category is often referred to as an industry, for example, the "furniture industry", which designates all units included in ISIC subsection 31 (Furniture manufacturing), or the "construction industry", which includes all units included in ISIC section F (Construction). An industry in the ISIC is defined as the totality of all production units engaged in predominantly the same or similar type of productive activity. ISIC is built on a conceptual basis focused on production or supply-side. The accounting units of ISIC, as a rule, are "enterprises", institutional units acting as producers of goods and services.

In the economic literature, interpretations of the concept of "industry" are very heterogeneous, depending on the author and his approach ^[5-10]. Nevertheless, when defining the industry, the authors identify the following fundamental features: the commonality of the economic purpose of the product (service) produced, the uniformity of the raw materials consumed, the unity of the professional staff, the similarity of the technical base and technological processes. Reznikova N.P., Lukin I.I. in the study of the field of information and computer technologies, offer their definition: "an industry is a separate socio-economic system that is distinguished (named) by people in certain conditions (a certain area) of their activities in order to solve management problems taking into account the needs and capabilities of the national economy and its individual a subsystem that has certain characteristics and structure, including a market one, expressing internal connections and the unity of its constituent elements"^[11]. Also believing that "the concept of "industry" is very important in analyzing the factors and driving forces of the development of the country's economy, individual regions, spheres of activity and organizations." K.K. Kumekhov in his work ^[12] notes that in the planned Soviet economy, the sectoral structure was considered as one of the central categories of management and planning. While with the transition to OKVED in a market economy, the focus of attention from the industry is shifting to the perfect competition of the market, which is considered as an exclusive control center and the influence of the state is weakening.^[13]

Thus, in the context of the modern regulatory framework, the sectoral structure should be considered as the internal structure of the economic system, which determines its specifics, characterized by the ratio of the types of economic activities carried out by it and studied in order to solve managerial tasks. In a broad sense, the sectoral structure of the economy characterizes the level of industrial and technical development of the country (region), specialization and place of the country (regions) at various levels of division of labor (global, national, regional), the level of labor productivity, the degree of economic independence of the country (region), the speed of industrial development, the level of social development. ^[14] The sectoral structure is influenced by many factors; first of all, it is scientific and technological progress, which leads to the emergence of new and completion of the life cycle of old industries, as well as the availability of a raw material base of natural resources, the implementation of state economic policy, traditional national specialization, the level of development of public welfare and national culture.

Materials and methods of research

The construction of a methodological approach to the study of an industry structure is naturally determined by the purpose for which it is created. The study of the sectoral structure, for example, can be carried out in order to determine ways to maximize national wealth, increase the efficiency of the economic system, increase gross value added, ensure the sustainability of the national economy, accelerate economic growth, increase competitiveness, or choose a strategy for promising growth in the future. There are two main areas of research of the industry structure in accordance with the set goals: the study of the dynamics and factors of sustainability and, on the other hand, the dynamics and factors of variability, as well as methods of managing these processes.   It should be noted that the sectoral structure that has developed in a particular region at some point in time, to a certain extent, reflects precisely the stable state of the economic system, while structural shifts reflect a change in its stable equilibrium state. In this case, the management of structural shifts in the desired direction, as far as it is possible, will determine both the methods of studying the industry structure and the methods of influencing the dynamics of changes in the industry structure.

When studying the sectoral structure of the economy, well-known indicators of the industry's share, the ratio of the largest industries to each other and the ratio of the industry's growth rates relative to larger categories are traditionally used, which are calculated based on time series of dynamics. The correlation of industries in the context of three sectors of production, spheres of activity, territorial production complexes, infrastructure development, etc. is studied. In turn, when studying the specialization of the sectoral structure of regions, the coefficients of localization of production, industry specialization, per capita production, regional marketability (for export and import) and commodity exchange are used. There are also alternative approaches to the study of the industry structure based on the modification of the coefficient of industry specialization^[15], the calculation of the index of regional specialization ^[16].

The research of methods for measuring and evaluating structural shifts in the Russian economy is devoted to the works of Spasskaya O.V. ^[17],[18], Bessonov V.A. ^[19], Krasilnikova O.Yu.^[20],[21], Sukharev O.S.^[22], Lyakin A.N.^[23], Perstneva N.P..^[24], Akberdina V.V.^[25], as well as a significant number of scientific publications by other authors. Thus, in the work of O.V. Spasskaya ^[18], an approach to the assessment of structural shifts based on the vector method was developed: measuring the angular distance between vectors of structural change. The existence of a relationship between the intensity of structural shifts and the rate of change in production volumes was revealed, which was confirmed on the basis of correlation analysis, and the presence of a link between the dynamics of production resources (employment and fixed assets) and changes in the sectoral structure of the economy was also shown. At the same time, it is shown that the low intensity of structural shifts is accompanied by low rates of economic growth, in turn, the high intensity of shifts in the sectoral structure corresponds to periods of increased rates or sharp declines in economic growth. 

To assess structural shifts, researchers often use statistical indicators developed by the following scientists: L.S. Kazinets, K. Gatev, A. Salai, V. Ryabtsev. ^{[26],[27],[28],[29]} Formulas for calculating indicators of structural shifts are given in Table 1. V. Ryabtsev's index of structural shifts is used by most researchers because it has a gradation of assessment of the measure of the materiality of structural differences and can be applied to any statistical aggregates. At the same time, the chain indices of structural shifts reflect the dynamics of the intensity of structural changes, i.e. they allow us to assess in which of the periods the analyzed structure underwent a more significant change, and in which less. In turn, the basic indices of structural shifts characterize the progressive or spontaneous changes of the object under study. 

Table 1 – Indicators for assessing structural shifts

In our opinion, a comprehensive study of the sectoral structure of Russian industry should be structured as follows. To conduct a horizontal study of the sectoral structure of the national economy, to investigate the ratio and dynamics of structural changes in three sectors: extractive, manufacturing, and service sectors, to assess basic and chain structural shifts, to investigate the sectoral organization of the manufacturing sector.  The study of the sectoral structure should be carried out using the most informative indicators of macroeconomics: the structure of gross value added, the volume of industry production, the structure of the number of employed personnel, the structure of exports of goods and services by type of economic activity. The data of the Federal State Statistics Service for the period 2000-2022 and the general data of the United Nations Statistical Division for Industrial Development for the period 1990-2021 were used as objects of the conducted research of the sectoral structure.

The results of the conducted research

During the period under review, the sectoral structure of the gross value added of the Russian Federation has changed significantly (Fig. 1). The main trends are a significant decrease in the share of agriculture from 16.5% in 1990 to 4.2% in 2021, mining and energy from 40.4% to 29.3%, manufacturing from 27.1% to 16.3%.

Fig. 1. The sectoral structure of the gross value added of the Russian Federation, in %. (Source: compiled by the author according to the UNIDO statistical data portal, URL:https://stat. unido.org/SDG/RUS.

Also, during the period under review, the share of construction decreased from 10% to 7.6%. At the same time, there is a significant growth in the trade, hotels and catering sector from 6.6% in 1990 to 16.2% in 2021, a huge growth in the service sector from 16.2% to 35.4%. These trends reflect the structural restructuring of the Russian economy that took place after the collapse of the USSR, as well as changes in the state economic and international the policy of the Russian Federation. A graphical interpretation of the dynamics of the sectoral structure shows that the primary structural shifts occurred in the economy in the period 1991-1992 and up to 1995. During this period, there was an initial decline in the share of industrial production and agriculture, construction and the public services sector in value added with peak trade growth.

In 1995, the share of trade in the value added structure exceeded that of manufacturing. Until 2002-2003, the trends were deepening, and in the sectoral structure of gross value added, the share of the service sector exceeded the share of the extractive industry. Since 2008, the share of the service sector has been predominant in the structure of gross value added of the Russian economy. By 2021, the sectoral structure of gross value added is dominated by the service sector (35.4%) and the extractive industry (29.3%), manufacturing (16.3%) and trade (16.2%) are in third place, agriculture has the minimum share (4.2%). Thus, the economic and political transformations that took place during the period under review led to a fundamental change in the sectoral structure of the gross value added of the Russian Federation.

Figure 2 shows the dynamics of seven enlarged manufacturing industries, which create from 82% in 2003 to 74% in 2022 of the gross value added of the Russian Federation.

Fig. 2. Dynamics of the sectoral structure of the gross value added of the Russian Federation, %. Source: compiled by the author according to the SNA, Federal State Statistics Service, URL: [https://rosstat.gov.ru/statistics/accounts ].

In 2003, more than 60% of the value added structure was produced in the following industries: food production (17%), metallurgy (17%), machine-building and instrument-making production (17%), production of coke and petroleum products (12%).  Over the past two decades, the share in the structure of metallurgical production has "expanded" from 17% in 2003 to 20% in 2022 and chemical production from 5% to 11%. Food production (from 17% to 14%), production of coke and petroleum products from 12% to 9%, production of motor vehicles, machinery and equipment from 17% to 10% underwent a "compression" of the share in the structure.

Figure 3 shows the sectoral structure of employment in the main enlarged sectors of the Russian economy.

Fig. 3. Dynamics of the sectoral structure of employment in the Russian Federation, in %. (Source: calculated by the author according to EMISS data, URL:https://www.fedstat.ru/indicator/58994. 

During the period under review, the share of employment in manufacturing decreased from 19% in 2000 to 14% in 2022 and in agriculture from 14% to 6%. The share in the employment structure of the construction industry and energy sector is increasing from 10% in 2000 to 12%, in the transport and communications sectors from 8% to 10%, in trade from 14% to 19%, and in the services sector from 34% to 37%.

The following trends are observed in the sectoral structure of manufacturing industry employment (Fig. 4).

Fig. 4. Sectoral structure of employment in the manufacturing industry of the Russian Federation, %. Source: calculated by the author according to EMISS data, URL: https://www.fedstat.ru/indicator/58994 .

More than 58% of the employed personnel are concentrated in the four largest industries: food, engineering, electrical equipment and finished metal products. Over the period from 2017 to 2022, the share in the sectoral structure of employment in the food industry increased from 18.9% to 20.1%, in the production of finished metal products from 7.6% to 9%, the woodworking and paper industry from 5.5% to 6.1% and the manufacture of furniture and other products from 4.1% to 5.2%. The share of chemical production employment increased from 4.1% to 4.4%. The share of employment in the production of transport, machinery and equipment is significantly decreasing from 18.4% to 15.3%, as well as in the production of electrical and electronic equipment from 8.3% to 7.5%. The share of metallurgical production in the employment structure (5.7-5.8%), repair and installation of equipment (5.2-5.4%) did not change significantly.

The dynamics of the sectoral structure of exports is shown in Figure 5. More than 77% of export revenues of the Russian economy are generated by four main sectors of production:

-mining: 23-36%;

- production of coke and petroleum products: 22-35%;

- metallurgy and production of finished metal products: 12-23%. 

Fig. 5. The sectoral structure of exports of the Russian Federation, in %. Source: a list of authors according to the EMISS data, URL:https://www.fedstat.ru/indicator/58575.

During the period under review, the share of metallurgical production in the export structure decreased from 22% in 2007 to 16% in 2022, and the production of coke and petroleum products from 24% to 22%. The share in the sectoral structure of exports in the manufacturing industry as a whole decreased from 67% in 2007 to 55% in 2022, which is caused by the current geopolitical situation and sanctions policy against Russian products on international markets. At the same time, this contributed to a noticeable increase in the share of mining in the sectoral structure, which increased from 24% in 2007 to 36% in 2022. The share of machine-building production in the export structure is small (3-5%), during the period under review it also decreased from 4% in 2003 to 2% in 2022 G.

Table 2 shows the main calculated chain and basic (last column) indicators of structural shifts in the industry structure in terms of gross value added, employment and export volume. According to the table, it can be concluded that the most significant changes affected the sectoral structure of gross value added: the basic coefficient of absolute structural shifts was 3.189, while the average relative increase in specific gravity was 4.89%, and the value of the integral index (according to V. Ryabtsev) was 0.718, which indicates that changes in the structure of the aggregate are significant and they are close to the maximum values. This confirms the conclusions about the change in the sectoral structure of gross value added in favor of a decrease in the share of the extractive and industrial sectors in the economy with an increase in the share of the service sector in the Russian economy over the period under review.

Table 2.

Indicators of structural shifts in the Russian economy 2008-2022.

The analysis of structural shifts in the volume of exports of the Russian Federation shows that the industry structure has the highest percentage deviation of specific weights of 3.251%, the coefficient of relative increase is 8.5%, while the value of the integral index indicates the identity of the structure with higher fluctuations of its elements: 0.165. The sectoral employment structure turned out to be the most stable of the considered ones, since the basic coefficients of absolute and relative structural shifts were 2.35 and 2.75, respectively, the generalizing coefficient of structural shift is 0.19, and the integral coefficient is close to the minimum value, which indicates an insignificant change in the structure.

Discussion

In the study of structural changes in the Russian economy in the period 1990 to 2000. Spasskoi O.V.^[22] it is shown that "the change in the structure of GDP produced occurred not so much due to the outstripping growth in the output of tertiary sectors, as due to a reduction in the output of high-tech products in primary and secondary spheres, which indicates negative changes in the economy characteristic of underdeveloped countries, since, as world experience shows, it is production high-tech products with a high degree of processing are the foundation on which the well-being and progressive development of the leading countries of the world are built." This correlates with the work of Rodrik D.^[30], where it is shown that developing countries are characterized by the phenomenon of "premature deindustrialization", i.e. an increase in the share of the service sector in the sectoral structure in the absence of a developed manufacturing industry, which occurs due to the expansion of free trade in industrial goods with developed countries. ^[31] As shown by N. Haraguchi, at the present stage, despite the emerging trends of growing digital transformation, increased consumption, uncertainty and sharp jumps in natural resource markets, the key role of the manufacturing industry in developed countries has remained the same ^[32].

The work of V.A. Bessonov shows that a significant part of the structural shifts in the Russian economy in 1990-2010 was due to inherited structural imbalances of the Soviet planned system: its closeness, resource intensity and low competitiveness of final products, which became the main weakening factors of subsequent inevitable transformations during the transition to a market economy.^[19] In 1990, in the Soviet economy, the bulk of gross value added (84.0%) was created in the extractive industry (40.4%), manufacturing (27.1%) and agriculture (16.5%).  By 2003, the total share of these sectors in the value added of the Russian Federation had decreased to 49.4%, due to the growth of the trade, transportation and storage sectors from 16.8 to 33.1%. It can also be argued that the high proportion of the service sector in the sectoral structure reflects not so much the degree of their development as the state stimulation of the public sector. ^[33] The shift of advantages in the manufacturing industry should not be interpreted as an unambiguously negative trend, since enterprises of Russian industries specializing in international markets, such as oil and gas production, metallurgical and chemical production, over the past decades, with significant foreign exchange resources, have modernized production, updated basic production assets, mastered new technological processes, The degree of processing was increased, which was reflected in the growth of added value in these industry areas, such as oil refining and metalworking, and the production of chemicals. A negative trend in this area is the weakening of domestic production of means of production: mechanical engineering, primarily machine tool and instrument engineering, electronics, since the equipment was updated mainly due to imports. Thus, the conducted research rather confirms the theses about the ongoing processes of gradual deindustrialization in the Russian economy. The growth of the service sector with a decrease in the share of industry in the creation of a national product can also be characterized by the transition to a post-industrial type of social structure.  

Conclusion

Thus, in conclusion of the conducted research, we note that the consideration of the sectoral structure should be carried out in the context of the process of social development and understood as the internal specific structure of the economic system, which is characterized by the ratio of the types of economic activities carried out. The sectoral structure of industry generally characterizes the level of industrial development of the country and the region and determines their place in the social division of labor. The conducted research allows us to conclude that during the period under review there were fundamental changes in the sectoral structure of the Russian Federation in terms of gross value added, the share of oil refining, chemical industry, metallurgy industries increases, while the share of mechanical engineering and instrumentation decreases. The share of high-tech industries such as mechanical engineering and electronics and agriculture is decreasing in the sectoral employment structure, while the share of employment in trade and construction, transport and communications is growing. The share of manufacturing industries in the sectoral structure of exports is decreasing, and the share of the extractive industry is growing. During the period under review, significant structural shifts occurred in gross value added, where the value of the integral coefficient of structural shifts was 0.718, with average fluctuations of structural elements of 4.895. Structural shifts in employment and exports are less significant. The changes taking place in the sectoral structure of the Russian economy can be characterized as trends in deindustrialization and the transition to a post-industrial society.

Thanks

The article was prepared as part of the state assignment of the Ministry of Science and Higher Education of the Russian Federation for the Institute of Economics of the Ural Branch of the Russian Academy of Sciences.