# _MEASURING FIRM ENTRY AND EXIT_

The firm-level database, RUSLANA, provides information on whether a Russian firm is active or inactive. If a firm is taken out of the dataset, the data also indicates why it has been removed. This is used as one of indications that the firm has exited the market. However, in addition to checking whether firms are active a condition was added that verifies whether a firm has two consecutive years in which either data for that firm are missing or it reports zero turnover. This extra condition provides additional reliability in defining whether a firm has exited rather than just relying solely on the information provided by the dataset.<sup>29</sup> In sum, a firm is considered to have exited the market if it is listed as inactive and is missing two consecutive years of data. RUSLANA also provides the date of incorporation of a company; this is used as the date of establishment for a firm. Table A10 provides a summary of number of exits and entries per year.

**Table A10: Number of exits and entrants per year**

|**Year**|**Number**<br>**of exits**|**Number**<br>**of new**<br>**entrants**|**Number**<br>**of firms**|
|---|---|---|---|
|**1999**|609|2,652|21,585|
|**2000**|659|3,176|28,311|
|**2001**|873|3,584|35,680|
|**2002**|2,390|4,480|53,018|
|**2003**|2,148|6,379|57,395|
|**2004**|5,647|6,055|65,955|
|**2005**|5,366|6,365|65,151|
|**2006**|4,295|6,269|64,549|
|**2007**|4,067|6,105|65,508|
|**2008**|3,588|4,840|64,036|
|**2009**|2,727|3,618|61,045|
|**2010**|2,360|3,839|59,186|

Source: Author’s calculations using RUSLANA An obvious concern with this method is the ability to separate entry and exit in the dataset with that from the economy. In case of entries, this is straightforward since RUSLANA provides information on the date of incorporation (separate from entry into the dataset), thus clearly delineating entry into the economy. The information on exit more complicated since it relies on administrative data, which could experience varying lags in reporting. There is confidence, however, that the additional condition of two consecutive years of missing or zero turnover would be enough to correct for these lags and accurately capture the time of exit since even if the firm is falsely reported as still present in the economy when it has not been operational it will be captured by this condition checking for missing or zero values.

The inability to reliably distinguish between an exit and when a firm merges is acquired or makes other drastic changes of this kind is an issue that could not be resolved using these data. The criteria used here would classify instances where companies were only technically closed due to a merger or an acquisition, a change of name, etc. as an exit. Estimating growth rates, volatility, surges, slumps, depth and duration The methodology used to compare growth rates and, identify growth surges and slumps, and measure the depth (height) and duration of slumps and surges is described below. In addition, the metric used to measure firm exits and entry is explained.

> 29 The information on the reason and time of exit are based on administrative datasets such as the tax directorate or social security, hence the exit of certain firms in the dataset at times occur after few years it has been created.

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