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The Effect of Western Technology on Soviet Industrial Development

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  • Markevich, Andrei
  • Santavirta, Torsten

Abstract

During the Soviet Union’s First Five-Year Plan, Western know-how and technology were infused into industry through contracts with foreign specialists and companies. We study the effect of this state-led policy on labor productivity using its largest single recruitment effort, Karelian Technical Aid, letting us exploit exogenous variation in technology transfer within one sector: the wood processing industry. Combining individual-level data on over 5,000 North American specialists with a novel panel covering the universe of interwar Soviet enterprises in Karelia and the Northern Region, we document large and persistent productivity gains, providing the first causal estimates of Western technology transfer in Soviet industrialization. Our findings suggest that such foreign assistance served as a fast, cheaper substitute for the formal apprenticeship system. The gains operated through transmitted tacit knowledge rather than capital, concentrated at less capital-intensive stages of the value chain and where elementary schooling and a shared language enabled knowledge absorption.

Suggested Citation

  • Markevich, Andrei & Santavirta, Torsten, 2025. "The Effect of Western Technology on Soviet Industrial Development," CEPR Discussion Papers 20811, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:20811
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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • N64 - Economic History - - Manufacturing and Construction - - - Europe: 1913-
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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