The Effect of Western Technology on Soviet Industrial Development

During the Soviet Union’s First Five-Year Plan, Western know-how and technology were extensively infused into industry through technical assistance agreements and work contracts with specialists and foreign companies. We study the causal effects of this purposeful state-led policy on labor productivity using the largest single recruitment effort of Western expertise, namely Karelian Technical Aid. This allows us to exploit exogenous variation in transfer of technology within one sector: the wood processing industry. Combining detailed individual-level data on over 5,000 North American specialists with a novel panel of accounting data on the universe of Soviet enterprises in Karelia and the Northern Region during the interwar period, we document large and persistent causal productivity gains. Important drivers of successful technology absorption were local human capital and the absence of language barriers.