Who is Shouldering the Burden of Transition? An Analysis of Depreciation Rates in Russian Industry*

Did maintaining existing tax codes governing depreciation rates in Russian industry between 1992 and 1995 target particular types of firms to carry a disproportionate share of the burden of transition? Firm-level data collected in 1992 and 1995 are utilized here to assess whether the “engines of transition” - non-state-owned firms, and firms with export experience shouldered a disproportionate share of the burden in the form of below-average depreciation rates and thus an above-average tax burden. The results indicate that ownership and export experience are important explanatory variables in explaining within-industry variation in depreciation rates in 1992. While non-state-owned firms did exhibit below-average depreciation rates in 1992 and thus incurred a higher tax burden, exporters as a category of firms exhibited above-average depreciation rates. Thus, the results are mixed with regard to whether the “engines of transition” shouldered a disproportionate burden. By 1995, the effects of both ownership and export experience on the variation of within-industry depreciation rates diminishes. Regional variation becomes more pronounced in 1995, and tends to coincide the regional variation in the pace of transition.