Abstract
This study explores firm dynamics and the efficiency in factor allocation in manufacturing and business service sectors in the Ukraine from 2001 to 2007. The period under study was one of the rapid growth at the macro-level, while the main sectors have undergone considerable churn and reallocation. My findings are based on an analysis of firm-level data and display different pictures for the two main sectors. In business services, large establishments that are mostly state-owned hold an important portion of production factors inefficiently. Firms need to be very productive to enter into the business service industries, and on average, exiting firms are more productive than incumbents. In contrast, market selection is efficient, creative destruction is well functioning and the state-owned firms are as productive as private establishments in manufacturing industries.
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