Measuring the strength of market selection in Russia: When the (firm) size matters

In this study, we evaluate the effectiveness of market selection based on data of Russian manufacturing firms from 2006 to 2017 and compare our results with those for foreign countries. To do this, we decompose the labor productivity at the industry level to determine the contribution from the redistribution of market shares from less to more productive companies. We also conduct a direct econometric assessment of the relationship between firm productivity and revenue growth. The results obtained indicate a moderate role of market selection in Russia. If we measure the firm productivity by estimating the value added per employee (labour productivity), then estimates for Russia are lower than for other OECD countries, while estimates based on total factor productivity are generally comparable. We also find that the role of market selection is higher for small and medium-sized enterprizes, which indicates the need to stimulate competition especially among large firms.