Does Market Structure Matter? New Evidence from Russia

In this paper we re-examine empirically the Structure-Conduct-Performance relationship between concentration and profitability using new data on Russia that allow us to overcome the endogeneity problem of market structure and expand on the traditional analysis in several ways. The analysis yields several important results. We find strong evidence that national concentration does increase profitability, but only in geographically dispersed industries, suggesting that regional markets are an important source of market power for oligopolistic industries. We find preliminary evidence that the effects of market structure are persistent in the long run. And we find for Russia that capital intensity is negatively related to profitability, suggesting that capital-intensive industries face higher adjustment costs and thus are less profitable after recessionary shocks.