Scientific Report "Agglomeration effects in Russian manufacturing"

HSE International Center for the Study of Institutions and Development (ICSID) and NES Center for the Study of Diversity and Social Interactions held another session of their Research Seminar on Diversity and Development. The event was held jointly with the seminar “Political Economy”.

Tatiana Mikhailova, Assistant Professor at the Faculty of Economics and Senior Research Fellow, Institute for Applied Economic Research, RANEPA, presented her paper "Agglomeration effects in Russian manufacturing"(co-authored with V. Gordeev and R. Magomedov).

Abstract: Large cities generate agglomeration economies – productivity advantages for firms, but competition is also stronger in large integrated markets. We analyze productivity of Russian manufacturing firms, estimate the size of agglomeration economies in modern Russia and look for the evidence of competitive selection effects. The estimated elasticity of firm-level productivity to the city size in Russia is generally higher than the average for the developed countries, and only a negligibly small fraction of it is due to city size endogeneity. We find no evidence of competitive firm selection at the lower end and some evidence of dilation of the upper end of productivity distribution in large markets. Thus, as of today, pure agglomeration effects are strong and local competitive pressures are rather weak for Russian manufacturing. Consumer-oriented industries benefit more from agglomeration, while in resource-based industries agglomeration effects are much weaker.