Maria Chernova

Modern Approaches to Measuring the State Sector: Methodology and Empirics

This article attempts to estimate the scale of state participation in the Russian economy in temporal dynamics and in comparison with other countries. Our unique methodology suggests a set of alternative approaches to measuring 3 independent components: stateowned enterprises (SOEs), state unitary enterprises and the public administration sector. Our results reveal growth of state involvement in the economy up to 46% of GDP in 2016. The share of SOEs and public administration in GDP rose from 20.2% and 16.9% in 2006 to 25.3% and 19.2% in 2016, respectively, by conservative estimates. A crosscountry comparison suggests that market capitalization, employment and SOEs’ share in GDP are significant and increasing. The share of public administration corresponds to the same estimate for OECD countries, but it is also increasing. The total state share and its growth can be evidence of an alarming trend for the Russian economy. It is 6%-12% higher than the estimate for most developing countries and, unlike in China or India, it keeps growing. This leads to state expansion in the economy, growth of state influence on SOEs and a transfer of noneconomic risks to SOEs. Apart from increasing state involvement in added value creation, the state plays an active role in reallocation of financial resources, and there is some evidence that it is even more significant than the state share in creating added value measured by GDP.

Large-scale reluctant privatization: Contradictions and challenges under sanctions

The article discusses the practicability for privatizing some large Russian state-owned enterprises (SOEs) under sanctions. Privatization remains a significant trend in the economic policies of many countries, including Russia. The revenues from privatization demonstrate a steady upward trend worldwide. The effect of external sanctions which create significant difficulties in conducting privatization in Russia does not remove from the agenda the issue of privatization of large companies, but also makes it more relevant. Privatization is an effective tool for forming a competitive environment, increasing the efficiency of SOEs and reducing the presence of the state as a direct participant in market relations. The article contains not only theoretical arguments in favor of privatization, but also its relevance, especially considering the sectoral structure of the economy and the performance indicators of large SOEs. A particular feature of the research methodology is the evaluation of the performance of 29 large SOEs on the basis of a universal set of financial indicators. As a benchmark, we use the financial indicators of 144 Russian private companies and wide samples of foreign competitors for each SOE. The results show that the consolidated financial characteristics of SOEs tend to be inferior to those of private companies and foreign competitors. In addition, the total return, including dividend yield, on the state-owned enterprises’ equity is below the return of market benchmark with lowest risk.