ages about 60 percent, which is similar to that in the United States, and the largest Russian manufacturing enterprises (measured by number of employees) are not unusually large, compared with US firms. However, this analysis of structural dominance masks three underlying attributes of Russia's industrial landscape., Large Russian enterprises tend to be organized as single, integrated, multiplant establishments often located in or near the same city, whereas enterprises in industrial countries usually have multiple establishments at several different locations domestically and, often, abroad as well. Thus, the establishments of the largest Russian enterprises are, on average, significantly larger (in terms of number of employees) than their counterparts in other countries, including the United States. Although the existing level of horizontal integration in Russian manufacturing is largely a legacy of Soviet central planning, such integration appears to be increasing. The increase is due not to new corporate expansion, however, but to mergers and acquisitions., Many of the dominant enterprises in Russia are also highly vertically integrated (or have exclusive buyer-seller relationships). To be sure, putting successive stages of production under one corporate roof can result in economies of scale and reduce transaction costs. But in most industries, such vertical efficiencies exist only up to a certain point. Indeed, in many product markets throughout the world, it is increasingly cheaper for a firm to buy inputs (or sell outputs) on the open market than to produce them internally.Russia, because the enforceability of contracts still can not be taken for granted, there are strong incentives for vertical integration. The uncertainties and chronic shortages of the old Soviet supply system encouraged a high degree of vertical integration, which has persisted, in part, because of inertia. Moreover, vertical integration, like horizontal dominance, is increasing-again, usually through mergers and acquisitions rather than expansion. Importantly, excessive vertical integration superimposed on horizontally concentrated product markets can hinder the entry of rival firms., Significant political and economic power is wielded by regional authorities in Russia, a feature of other large transition economies, such as China. This is evident in the tight control of important economic activities within a region. Such control, in combination with vertical integration, helps freeze the high degree of structural autarky that appeared under the Soviet system, when producing consumer goods was a local responsibility and enterprises served only local markets. Worse, it strengthens administrative-as opposed to economic-geographic market boundaries and fosters the regional segmentation of the Russian economy, hampering the establishment of a unified economic space, strong interregional competition, and natural economies of scale.
Local authorities engage in a variety of practices to limit the interregional movement of goods and services, including charging duties on the «import» or «export» of certain alcoholic beverages; maintaining regional price controls on some agricultural products; imposing registration fees on workers from other regions; granting tax or credit preferences to support the building of local «business champions»; and supporting arbitrarily exclusive licensing. In this regard, it is telling that in recent years some of the most frequent violations dealt with by the Ministry of Antimonopoly Policy and Support for Entrepreneurship have been anticompetitive actions by local governments.
.2 Russian economic performance
most important single element explaining a country s medium-term growth performance is productivity. While economic growth can be based on many sources, for example capital accumulation or population growth, it is sustainable only if complemented by an increase in productivity. With a GDP per capita of US $ 10,521 in 2010 (international $ 15,806 in purchasing parity terms), over the 2000-09 period Russia achieved a relatively high GDP growth rate of 5.5 percent, which put the country on the path toward convergence with Organisation for Economic Co-operation and Development (OECD) levels (see Figure 1).
Figure 1: Russia GDP Growth Rate
, despite this positive development over the past decade, the gap between Russia and OECD economies in terms of GDP per capita remains sizeable, amounting to about 47 percent.some structural factors-such as demography, the employment structure, and above all the number of hours worked per person-contribute to closing the gap, the large difference in prosperity can be clearly attributed to differences in labour productivity (see Figure 2).
Figure 2: Disaggregation of difference in GDP per capita ...
