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National Interests: Priorities and Security
 

The application of production functions to analyze the effect of fixed assets on economic growth in the Russian Federation

Vol. 12, Iss. 10, OCTOBER 2016

PDF  Article PDF Version

Received: 14 June 2016

Received in revised form: 18 July 2016

Accepted: 8 August 2016

Available online: 1 November 2016

Subject Heading: SUSTAINABLE DEVELOPMENT OF ECONOMY

JEL Classification: С51, С65

Pages: 4-19

Lychagina T.A. Dubna International University, Dubna, Moscow Oblast, Russian Federation
lychagina@jinr.ru

Pakhomova E.A. Dubna International University, Dubna, Moscow Oblast, Russian Federation
uni-dubna@mail.ru

Pisareva D.A. Dubna Administration, Dubna, Moscow Oblast, Russian Federation
pisarevada@mail.ru

Importance The research examines how fixed assets of the Russian Federation influence an economic growth of the country through production functions.
Objectives The research formulates methods to analyze how the state of fixed assets influence the economic growth in Russia, and confirms the critical condition of the fixed assets through econometric modeling of economic growth.
Methods We conducted an econometric analysis using the Cobb–Douglas production functions. We used a linear least-squares method to set a linear model and nonlinear unconditional optimization to set a nonlinear model using the Levenberg–Marquardt iteration algorithm.
Results Using production functions, we analyzed how the state of fixed assets of the Russian Federation had been influencing the economic growth for 1999–2013. We built three regression model of the Cobb–Douglas production function. Drawing upon the regressions, we analyzed the production function, which approximates empirical material most and adequately describes the economic condition of Russia. The least-squares linear method provides a more exact description of empirical material than the nonlinear Levenberg–Marquardt algorithm. The sequence of analytical steps can lay the basis for methods to analyze how socio-economic factors influence the development of Russia.
Conclusions and Relevance The findings verify official data on the critical condition of Russia’s fixed assets, thus posing a significant threat to the national economic security. The national investment policy, which pursues new high-tech (innovative) enterprises, does not exclude the renewal of fixed assets in the existing enterprises in order to prevent the falldown in production and technological catastrophes.

Keywords: fixed assets, econometric analysis, economic growth, production function, return on production factors

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