STRUCTURAL DISPARITIES IN THE RUSSIAN IT LABOUR MARKET IN THE BALTIC REGION: QUANTITATIVE ESTIMATES AND POLICY IMPLICATIONS

Abstract

The paper identifies the channels through which the regional institutional environment affects the efficiency of labour resource utilisation in IT companies in the Baltic Region. On this basis, targeted recommendations for human resource and industrial policy are formulated for each of the three regions — St. Petersburg, Leningrad and Kaliningrad regions. It is shown that labour is the key factor of production in the IT industry. However, its returns vary across regions not so much because of quantitative differences, but rather due to the qualitative characteristics of the workforce and the institutional environment. Policy should therefore focus on improving the quality of human capital and refining the mechanisms for its efficient use, rather than simply expanding employment. Measures should be tailored to the specific characteristics identified in each of the three regions. The study empirically estimates the production function for the software development sector to examine how individual factors influence the performance of IT companies in the Baltic region and to assess regional imbalances. In St. Petersburg, technical efficiency is negatively associated with firm assets, firm age and the share of debt financing. In the Leningrad region, output elasticity with respect to capital is positive, and larger workforces are associated with higher technical efficiency. In the Kaliningrad region, output elasticity with respect to labour is negative, while a higher share of debt financing is associated with greater technical efficiency.