Russian Federation - The myth of monopoly : a new view of industrial structure in Russia

Discussion of economic reform in the Russian Federation is colored by the conventional view of Russia's industrial structure. Both in Russia and in the West, Russian industry is characterized as very large enterprises operating in highly concentrated industries. The authors challenge the conventional view. They assess Russian industrial concentration by comparing the Russian industrial structure (as revealed in the 1989 Soviet Census of Industry) with that in the United States and other countries. They find that very large firms are more prevalent in the United States than in Russia. This empirical fact suggests that planners economized on the costs of central economic coordination not by building unusually large enterprises, but by not building very small enterprises. Their most important finding: that there is little aggregate or industry concentration at the national level in Russia. Monopolies and oligopolies actually account for only a small share of national employment and production. Instead, barriers to competition in Russia arise as a result of highly segmented product markets. In large part, this segmentation can be viewed as a legacy of central planning. Under the prior regime, enterprises were highly isolated, divided alone both ministerial and geographical lines. Presently, these barriers are reinforced by some features of the transitional environment that continue to undermine the efficient distribution of goods. The authors conclude that the traditional policy remedies appropriate for problems of concentration (such as antitrust policy and import competition) may be ill-advised or inadequate for addressing problems of imperfect competition in the Russian economy. They argue instead that improving the distribution system and other market infrastructure that supports trade and facilitating the entry of new firms should be the most critical elements of competition policy in Russia.