The purpose of this paper is to investigate the role of digital competence in the impact of digitalization of economy on labor productivity in Russian regions. The dataset covers the data on 85 Russian Regions for the 2015-2017 years collected from Unified Interdepartmental Information and Statistical System (EMISS) and Federal State Statistics Service of the Russian Federation (Rosstat). We applied mediation analysis with structural equation models (SEM) to achieve research goal. The study showed the negative direct effect of digitalization on labor productivity in Russian Regions. The indirect effect of digitalization on labor productivity through the mediator variable digital competence is positive and significant with one-year lag. Our model showed small, but positive and significant total effect of digitalization on labor productivity.