assessment of the urbanization impact on economic growth in russia

ISSN 2079�9705, Regional Research of Russia, 2012, Vol. 2, No. 4, pp. 292–299. © Pleiades Publishing, Ltd., 2012.Original Russian Text © E.A. Kolomak, 2011, published in Region: Ekonomika i Sotsiologiya, 2011, No. 4, pp. 51–69.

292

The last century’s trend in international develop�ment has become the increase in the role of cities. Theurbanization process has affected all countries and ischaracterized, firstly, by a rapid increase in the urbanpopulation and, secondly, rapid growth of large cities.In 1900, 13% of the world population lived in cities; in1950, 29%; in 1990, 46%; and in 2010, more than50%. If at the beginning of the 20th century there wereten cities with a population of more than 1 million, by2000 their number had reached 400. In many devel�oped countries, the proportion of the urban popula�tion is 75–80%, and this figure has been stable inrecent years. In developing countries, the share of theurban population is much lower, but the growth ratesof urban population are higher.

The spatial organization of productive activity is animportant factor affecting the rate, efficiency, and struc�ture of development. Changing the system of settlementin favor of cities has become a significant feature and partof the economic dynamics of most countries.

URBANIZATION: RESOURCES AND FACTORS CONSTRAINING DEVELOPMENT

UN�HABITAT data [1] suggest that the economicgrowth rate and the urbanization level are positivelycorrelated. Another publication of this organization

[2] provides graphs showing that labor productivity inthe largest cities of the world is much higher than thenational average. This statistic suggests that urbaniza�tion can stimulate economic growth.

Theory suggests a number of sources of benefitsthat are associated with urbanization both for con�sumers and producers. When the spatial concentrationof population and labor resources takes place in a city,it results in an increased number of different consumermarkets and related specialized industries. Consum�ers’ love for diversity implies that a city, offering agreater range of products and production resources,increases the utility for the population. Respectively,large cities must demonstrate much higher productiv�ity, and consumers’ welfare increases with the size ofthe total population.

Cost savings due to the proximity of counterpar�ties, which is provided by the localization and agglom�eration effects of a city, influences suppliers. Intercon�nections among firms include market and transactioninteractions. The proximity of consumers of produc�tive resources to suppliers provides resources withlower transport costs, which makes it possible toreduce prices, as well as increase developmentresources and market supply. Suppliers also haveincentives to be located in the metropolitan area, asdemand from enterprises, acquiring resources through

URBAN DEVELOPMENT

Assessment of the Urbanization Impact on Economic Growth in Russia

E. A. KolomakInstitute of Economics and Industrial Engineering, Siberian Branch, Russian Academy of Sciences, Novosibirsk

e�mail: [email protected] August 22, 2011

Abstract—The paper studies urbanization trends in Russia, discusses the advantages and disadvantages of theurbanization process for economic development, and provides an empirical analysis of the relationship betweeneconomic growth and urbanization in Russian regions. The tested hypotheses are the following: (1) urbanizationstimulates growth in regional productivity in Russia, (2) the positive effect of urbanization on the regional pro�ductivity in Russia is decreasing and at some point will become an impeding factor, and (3) large cities demon�strate higher performance and create positive externalities for the overall regional development.The idea of econometric estimates is to expand an aggregate regional production function including the urban�ization level and the agglomeration capacity of cities. We use annual panel data for 79 Russian regions and coverthe period 2000–2008. The estimates obtained show that an increase in the share of the urban population in thecountry by 1% increases the average regional productivity by 8%. However, the effect of urbanization is reduc�ing. Growth in a city’s size per 1000 residents would increase economic productivity by 0.1% only. Despite thehigh level of urbanization in Russia and a number of negative effects, the urbanization resources have not beenexhausted. Cities develop effectively, creating positive externalities.

Keywords: urbanization, Russia, structure of urbanization, trends in urbanization, advantages and disadvantagesof urbanization, economic development, empirical estimates, aggregate production function, panel analysis

DOI: 10.1134/S2079970512040041

REGIONAL RESEARCH OF RUSSIA Vol. 2 No. 4 2012

ASSESSMENT OF THE URBANIZATION IMPACT 293

low transaction costs, can be significantly higher thanoutside. It is impossible to rule out the existence ofgoods that are only exchanged within a metropolitanarea, as a number of industries are only profitable underthe conditions of a considerable demand level in a com�pact area. Thus, the colocation of suppliers and con�sumers of resources reduces total costs, promotes pro�duction efficiency, and creates additional opportunitiesto expand the existing markets and establish new ones.

The tendencies of modern development are deep�ening of specialization and increased dependence oncontractors. Active ties among enterprises in citiescontribute to the creation of clusters and networks,help to eliminate the negative effects of intrabranchcompetition, and reduce the risks of interfirm interac�tion. Such a concentration also gives an opportunity touse shared resources in a flexible way and reduce pro�duction costs and provides access to a spectrum of spe�cialized services.

Cities create opportunities for the more efficientuse of production and social infrastructure, which, asa rule, refers to public goods. Expanding the numberof users makes it cost effective and diverse, and thereduction of individual costs fosters development. Theresult is a higher standard of life quality in comparisonwith peripheral rural territories. This is reflected in thepresence of more developed transport, communica�tions, health and education, and culture and leisureindustries. Reducing the cost of services of infrastruc�tural sectors due to a high population density makesthem available, forming additional opportunities forbusiness development and human capital.

Key factors of modern development are innova�tions, information, and knowledge. The concentra�tion of economic, financial, administrative, andhuman resources creates preconditions for the activeexchange of business information and initiation andspread of innovations. Innovations are increasinglymore encouraged by interactions among variousbranches than among firms within the same industry.Therefore, cities are not just more effective thanks tothe scale effect: they have advantages in terms of cre�ation and in the introduction of new technologies,which gives an impetus to development and growth inlabor productivity. Innovative development imposesspecial requirements on the infrastructure related toeducation and science. Knowledge, its accessibility,and the intellectual capital, generating innovations,become important factors of production efficiencygrowth and expanding the range of new products. Cit�ies are places of concentration of higher educationalinstitutions and academic science, besides leaders inthis field are large and the largest cities. The urbanbusiness infrastructure offers institutions and areas fordevelopment; its elements are business parks, businessincubators, technology parks, etc. They contribute tothe spread of innovations, reduce production costs,and shorten the payback period for efficient produc�tion volumes.

However, there is also a limitation: the value of aninnovation is reduced when knowledge spreads rapidlyamong other firms.

Cities are characterized by more advanced andflexible labor markets; besides, the larger the city, thegreater its capacity to meet the business demand.Modern technologies make demands not only inrespect of the size, but also the structure, quality, andqualifications of labor resources, and the weight of thecontribution of human capital in the dynamics andcharacteristics of development is increasing con�stantly. The characteristics of labor have an influenceon the type of production, on the generation of inno�vations, and receptivity to them. The level of educa�tion and the age and social structure of the populationalso determine its propensity and ability to entrepre�neurship and business culture. A city benefits signifi�cantly compared to rural populations in these charac�teristics. There is also a drawback: in cities, the popu�lation has a wider range of employment choices. In theclassical theory of consumer behavior, such an exten�sion is interpreted as an increase in individual utility.In addition, this means that a person gets an opportu�nity to use his or her skills and abilities more fully andfinds their most effective use in the production sector.

The concentration and diversity of resources inurban and metropolitan areas allow one to use theeconomies of scale produced by a large market andcombine various factors of production; however, undercertain conditions, the rapid growth in urban settle�ments is accompanied by negative consequences.The limits of the urbanization process are set byresource constraints. Cities with high rates of exten�sive development form increasing demand and anespecially high load on nontransportable factors ofproduction: land and water. A shortage of land leadsto its high price and crammed quarters. Water pollu�tion also entails costs associated with the creation ofcleaning systems, sewage, and sustainable water sup�ply chains.

Cities suffer from environmental degradation andair pollution from enterprises, power plants, and vehi�cles. The population of a big city is far away fromnature and green spaces, the preservation of whichbecomes a difficult task under the conditions of landdeficiency. In the modern world, the state of environ�ment and local resources is becoming an increasingrestriction for economic activity.

One of the most acute problems for large cities isthe transport infrastructure. The saturation of cities byroad transport is increasing, while decisions on theconstruction of effective interchanges and the widen�ing of roads are made with great delays and require sig�nificant resources. As a result, people need plenty oftime to move within a city to their place of work oreducational institutions, which, as a rule, belongs tounproductive activities. Urban residents are also sub�jected to increased risks of traffic accidents and fatali�ties.

294


KOLOMAK

The other side of the concentration of economicactivity and high population density in urban areas is areduction in housing affordability and overcrowdingwhich reduces the attractiveness and quality of life in acity and often provokes an increase in crime.

It is statistically confirmed that as the general wel�fare level of the population of large cities increases,sharp income stratification and growth in absolute andrelative poverty take place. This leads to the accumu�lation of discontent and social conflicts and is a hin�dering factor for economic development. The reasonsfor economic slowdown are firstly the need for a large�scale redistribution of income, causing net losses forsociety. Secondly, the poor have limited opportunitiesfor education, and it is also more difficult for them toget loans for the purpose of opening a business; as aresult, the potential of this population is underutilized,which adversely affects the productivity of the econ�omy and its growth rates. Thirdly, conflict resolutionand the achievement of a fair balance in societyrequire additional resources that are spent unproduc�tively, which reduces the overall efficiency of the eco�nomic system.

Finally, the contradictory impact of urbanizationon the overall economic growth is confirmed by thefact that the development of cities not only occurs dueto internal resources, but to a greater extent due toexternal sources. Migration of population from vil�lages and small towns, business concentration, andaccumulation of financial and investment resources inmajor cities can lead to a high level of interregionalinequality and the emergence of stagnant anddepressed areas and “economic deserts” around cities.

The effects of urbanization on economic develop�ment are ambiguous and depend on the stages andcharacteristics of development, the network of spatialrelations, its density and structure, as well as on thefunctions of large cities. As a result, despite the pres�ence of some universal characteristics, the combina�tion of the costs and benefits of urbanization processesis different in each country.

EMPIRICAL ESTIMATES OF URBANIZATION EFFECTS

Worldwide Trends

In 1969, J. Jacobs formulated the idea of cities assources of economic growth, and since then thishypothesis has been tested on different databases [3].The rapid growth in urban population has given a newimpulse to researches of urbanization. As early as 2008more than half of the world’s population lived in urbanareas; by 2030, the urban population is projected toincrease to 5 billion people, and the cities of develop�ing countries will cover 81% of the world’s urban pop�ulation [2].

According to estimates by J. Henderson, in 2000the 38 largest cities of the European Union accountedfor only 0.6% of the total area but accumulated about

25% of the population and about 30% of GDP. In1998, in Japan, the central region, which includes fiveprefectures, occupied only 5.2% of the land; however,33% of the population lived there and 42% of GDPwas also produced in this region. In 1997, in theUnited States, 53% of the population lived in the 40largest cities [4].

The literature review on the agglomeration econ�omy by S. Rosenthal and W. Strange led authors to theconclusion that increasing size of a city by 2 times willincrease the productivity of firms from 3 to 8% in dif�ferent countries [5]. A study undertaken by otherauthors led to the conclusion that for China, Japan,and Sweden the rate of return is less than for theUnited States and France [6]. R. Nakamura, consid�ering estimates for Japan, came to the conclusion thatan increase in the urban population by half would leadto an increase in productivity by 3.4% [7]. A. Cicconeand R. Hall found a positive influence of the popula�tion density on productivity in the United States. Theyestimated that the doubling of the urban populationwould increase productivity by 6% [8]. In anotherpaper, A. Ciccone presented results for France, Ger�many, Italy, Spain, and the United Kingdom. Accord�ing to them, a twofold increase in the urban popula�tion will increase productivity by 4.5% [9].

The results of similar evaluations conducted forEastern Europe and Central Asia show that the aver�age agglomeration effect in them is higher than inOECD countries. G. Backes, making calculationsbased on data from Hungarian enterprises for theperiod from 1992 to 2003, came to the conclusion thatin the case of the doubling of the size of cities the pro�ductivity of production factors will increase by 16%[10]. This figure is by a factor of 2 higher than those inthe studies that were conducted by S. Rosenthal andW. Strange [5]. The estimates of the agglomerationeffects for Ukrainian companies obtained by V. Vakhi�tov [11] are also significantly higher than thosereported in the review of these authors. In the periodfrom 1980 to 2003, in the European territory, the con�tribution of the population density to the growth inlabor productivity increased steadily, and it was mainlydue to Eastern Europe countries [12].

Study of Urbanization Processes in Russia

Foreign studies of the urbanization in Russia weretraditionally held by political scientists and geogra�phers. They started from the postulate of irrationalspatial distribution of production as a result of the sys�tem of socialist planning, restrictions on migration tocities, and use of forced displacement of the Gulagsystem. This implied two conclusions: the first one wasabout the “overpopulation” of the northern and east�ern regions of Russia and the fallacy of creating largecities there, and the second one was the artificialrestraint on urbanization in the European part of thecountry [13]. Based on the postulate of the irrational�ity of urban settlement in the Soviet period, the



strengthening of interregional migration during thetransition to a market economy was forecast. However,this prediction did not come true.

As one of the reasons for the slow transition to amarket equilibrium, we offer an explanation that theplanned economy restricted internal migration tolarge cities and, on the contrary, encouraged migrationto medium�sized cities. In addition, despite the factthat with the fall of communism formal restrictions oninternal migration were abolished, the economic andpolitical factors that prevented the active movement ofpopulation actually remained [14]. The state of thehousing market also acted as a limitation. Afterreforms, the housing market was liberalized, but theSoviet legacy in the form of housing shortage, pecu�liarities of the demand for real estate, and the con�struction market monopolization distorted signifi�cantly the structure of the housing market: it turnedout to be far from competitive. The disadvantages ofreforms, badly divided property rights, and a lack ofinformation on land ownership and on the housingmarket led to significant transaction costs and a poorinvestment climate that held back investments in thedomestic property market [15].

During the Soviet and post�Soviet periods, in Rus�sia demographers and economic geographers system�atically studied urbanization problems. Among themwere G.M. Lappo, A.I. Treivish, T.G. Nefedova,Zh.A. Zaionchkovskaya, N.V. Zubarevich, S.S. Arto�bolevskii, etc. Lappo established works in this area. In1990, he had already expressed concerns about theinhibition of agglomeration processes [16]. Treivishapplied the theory of differential urbanization formajor regions of Russia [17]. Zayonchkovskaya evalu�ated the population migration mobility and the attrac�tion area of large cities on the basis of sociologicalstudies [18].

Economic analysis of urbanization is presented withsmall number of researches. Professor V.N. Leksin, oneof the few authors of fundamental studies, which ana�lyze economic problems of cities on the basis of munic�ipal statistics, in his latest publications is concernedwith the abnormally high (in his opinion) concentrationof economic and social potential in the administrativecenters of federal subjects and a few large cities. He con�siders the concentration of administrative resources in“regional capitals” as an additional factor of the aggra�vation of regional inequalities [19, 20].

Zubarevich analyzes the dynamics of the economicdevelopment of large cities, considering data on therelative density of cities in regions [21]. A group ofauthors from the Institute of Economic Forecasting,Russian Academy of Sciences [22], presented an anal�ysis of the main characteristics and problems of Rus�sian cities in the last decade.

The present paper complements studies of urban�ization processes in Russia. It proposes a quantitativeassessment of the concentration effect of economicactivity in cities on the performance in the country’sregions.

URBANIZATION TRENDS IN RUSSIA

Russia can be attributed to countries with a highlevel of urbanization. According to the National Pop�ulation Census of 2010, the share of urban populationin the country amounted to 73.7%. If the world urbanpopulation had only reached 50% in 2008, in Russia(Russian Soviet Federative Socialist Republic(RSFSR)), this level was recorded in the late 1950s.Naturally, the rate of urbanization processes in thecountry gradually decreased and stabilization wasachieved. In 1990 Russia’s urban populationamounted to 73% and has been varying in the last 20years within 1 percent point.

The change in the size of the urban population inthe country occurred due to three factors: naturalincrease, migration gain, and administrative–territo�rial reforms. The last factor is the creation of newurban settlements and transformation of rural settle�ments into urban ones or their inclusion within thelimits of cities.

The urban population’s natural decline, whichbegan in 1992, has become a major long�term factor,reducing the number of citizens. The migration out�flow from urban settlements, observed according todata for 1991–1992, aggravated the reduction in Rus�sia’s urban population (Fig. 1).

Administrative changes had a significant effect onstatistical data on the urban population in the country.In some years (in 1991, 1992, 1999, and, especially, in2004), the transition of urban settlements, especiallyurban settlements into rural ones, was particularlyambitious, but at the same time inverse transforma�tions—rural settlements into urban ones—continued[23]. One of the reasons for such administrative deci�sions was that the transformation processes in thecountry changed the directions of migration flows; asa result, part of settlements quickly began to lose pop�ulation, which served as a reason for changing theirstatus and even abolition. A certain role was alsoplayed by reforms of the local government, which ledto the formation of new municipalities combining sev�eral settlements. The transition of urban�type settle�ments into rural population centers and their inclusionwithin the boundaries of larger urban�type settlementsproceeded. As a result, the number of urban settle�ments was reduced and the number of cities continuedto grow, although not as fast as before (Fig. 2).

During the period from 1990 to 2010, the propor�tion of urban population in Russia decreased by 0.5%and in absolute terms the urban population of thecountry declined by 5 million people. The decrease inthe absolute and relative number of citizens in theseyears occurred largely at the expense of a reduction inthe number of urban�type settlements and the numberof their populations (Fig. 3). From 1990, the numberof urban�type settlements decreased by 332 units,while the number of cities during this period increasedby 54 units. Due to the influence of administrativedecisions, the indicator of the share of urban popula�

296


KOLOMAK

tion in the country, being an important and the mostcommonly used characteristic of the urbanizationprocess, does not always accurately reflect the dynam�ics of the processes in settlement networks.

According to data for 2010, 87% of the Russian cit�ies are small with a population of up to 50000 people,but almost 66% of the urban population is concen�trated in large cities with a population of 100000 peo�ple and more; moreover, about 25% is concentrated inmillion�plus cities. The populations of urban settle�ments most often range from 5000 to 10000 people butdo not exceed 50000 people.

Among Russian cities, Moscow (the number ofpeople in the capital exceeds 10.5 million people) and

St. Petersburg (4.6 million people) stand out by theirsize. The percentage of urban population concen�trated in million�plus cities increased in 1989–2002from 23.3 to 25.8%. By early 2010, it had dropped to24.8% due to the fact that because of a populationreduction Perm and Volgograd returned to the groupof cities with a population from 500000 to 1 millionpeople. However, the share of people living in big citieswith a population of over 100000 people increasedfrom 62.4% of the total urban population in 1989 to65.8% by early 2010. While the share of people livingin big cities in the general urban population, that is,excluding the population of urban�type settlements,

019

60

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

500

1000

1500

2000

2500

–500

–1000

–1500

administrative–territorial reformsmigration gainnatural increase

thous people

Fig. 1. Components of changes of urban population in Russia (RSFSR) in 1960–2008, thous people. Source: [23].

1926 1939 1959 1970 1979 1989 2002 2003 2004 2005 2006 2007 2008 2009

702 743

1495

18692046

2193

1842 1835 1793

14611359 1348 1361 1318

461 574877 969 999 1037 1098 1097 1099 1095 1096 109910951097

urban�type cities

Fig. 2. Change in the number of urban settlements in Russia (RSFSR). Source: [23].

settlements



remained relatively stable—approximately 71%(Table 1).

According to the degree of urbanization, RFregions differ significantly both at the level of majoreconomic regions and at the level of federal subjects.The Northwestern (83.5%) and Central (81.3%) fed�eral districts stand out by a high proportion of urbanpopulation; minimum urbanization rates are typical ofthe North Caucasus (49.1%) and Southern (62.4%)federal districts. The Altai Republic (27.6%), theChechen Republic (35%), the Republic of Ingushetia(38.3%), the Karachay–Cherkess Republic (42.3%),the Republic of Dagestan (45, 3%), the Republic ofKalmykia (44.1%), and the Republic of Tyva (53.1%)have the lowest share of urban population among allfederal subjects. Naturally, in Moscow and St. Peters�burg, the share of urban population is 100%.

URBANIZATION AND ECONOMIC GROWTH IN RUSSIA’S REGIONS

Model Specification and Information

From the above considerations, it follows that,firstly, there are arguments in favor of the positive

effects of urbanization on economic development andagainst it and, secondly, because of the large role ofagglomeration effects, the structure of urbanizationand the dimensions of urban settlements are impor�tant. On the one hand, the high productivity variationand, on the other hand, the share of urban populationand the characteristics of its distribution among settle�ments of different sizes in the federal subjects allow usto perform an econometric estimation in this regard.

A common technique is to use the idea of theexpanded aggregate production function Q = AF (K, L)as a basic theoretical model due to characteristics of theurbanization level and its structure: Q = AF (K, L, U, S).Here A is the total factor productivity, K is the produc�tive capital, L is the human resources, U is the urban�ization level, and S is the index of agglomerationpotential of urban settlements. We accepted the indi�cator of the share of urban population as an index ofthe urbanization level and applied the indicator of theaverage size of a city in a region to describe its capabil�ities to generate agglomeration effects.

Russian regions differ greatly by territory size andeconomic activity. For estimation, we used indicatorsof GRP per capita and fixed productive assets per cap�

2002

0

2009

1989

1979

1970

1959

1939

1926

20 40 60 80 100 120

8.1

10.5

13.5

12.0

11.0

9.4

5.3

2.5

95.6

95.9

94.5

82.9

70.0

52.2

31.0

13.9

mln peoplein cities in urban�type settlements

Fig. 3. Changes in Russia’s (RSFSR) population living in cities and urban�type settlements in 1926– 2009, mln people.

Table 1. Distribution of Russia’s urban population (RSFSR) according to cities of different sizes, %

Population, thous people 1926 1939 1959 1970 1979 1989 2002 2010

Up to 20 20.7 9.6 8.7 6.7 5.2 4.6 5.2 5.3

20–49.9 14.6 18.0 17.6 15.5 13.2 12.3 12.1 12.0

50–99.9 18.4 13.2 12.9 11.3 11.2 11.8 11.6 11.4

100–499.9 20.2 32.5 29.6 33.3 32.3 29.8 29.6 28.3

500–999.9 – 3.7 15.9 12.0 15.3 14.9 12.9 16.1

1000 and more 26.1 23.0 15.2 21.2 22.8 26.6 28.6 26.9

298


KOLOMAK

ita to eliminate the scale correlation and ensure thecomparability of the sample data. Reference booksand records of the Federal State Statistics Serviceserved as a source of data. The data used have a panelstructure and covers the period from 2000 to 2008: thistime interval differed with macroeconomic stabilityand sustainable growth, which eliminates the registra�tion of the impact of external and structural shocks.federal subjects are considered as regions, and thesample includes 79 regions.

An analysis of relationships (Fig. 4) shows that wecan assume the existence of a nonlinear relationshipbetween the urbanization level and economic develop�ment. The cloud of observations has the shape of aninverted parabola with a positive slope, which speaksin favor of the model specification with the presence oflinear and quadratic dependencies of GRP from theurbanization level. From a comparison of labor pro�ductivity and average size of cities in regions, it followsthat there is likely a linear relationship (Fig. 5).

Thus, the following functional form of the model isestimated:

where μ is the variable of the fixed regional effect.The following hypotheses are tested:Hypothesis 1. Urbanization stimulates growth in

labor productivity in Russia. This hypothesis suggeststhat coefficient c1 is positive and statistically signifi�cant.

Hypothesis 2. The positive influence of urbaniza�tion on labor productivity in Russia is reduced and at acertain level turns into a factor constraining develop�ment. From this hypothesis, it follows that coefficientc2 is negative and statistically significant.

Hypothesis 3. Large cities differ with higher pro�ductivity and create positive externalities for the devel�opment of the territory as a whole. For this hypothesisto be correct, coefficient d should be positive and sta�tistically significant.

Evaluation Results

A model estimation was performed by the methodof least squares with fixed regional effects. The testing

Ql�� A bK

L�� c1U c2U2+ + += dS μ ε,+ + +

ε N 0 σ2I,( ),∼

120

0

100

80

60

40

20

100 200 300 400 500 600 700 800 900 1000GRP per capita, thous rubles

Share of urban population, %

Fig. 4. Relationship between GRP per capita and urban population shares.

120

0

100

80

60

40

20

100 200 300 400 500 600 700 800 900 1000GDP per capita, thous rubles

140Average size of an urban settlement, thous people

Fig. 5. Relationship between GDP per capita and the average size of an urban settlement.



of the second moments of the error has shown corre�spondence to the classical assumptions on the stochas�tic structure of the model. The evaluation results areshown in Table 2.

The obtained estimates confirmed the hypothesisput forward in the analysis. An increase in the share ofurban population in the country by 1%, i.e., from 73.7to 74.7%, will increase the productivity by 8%. How�ever, the effect of urbanization is reduced which fol�lows from the negative sign at a variable of the squareof the urban population share. An increase in theurban population by 1000 people would only increaseeconomic productivity by 0.1%.

The analysis showed that, despite the high level ofurbanization in the country and a number of negativeeffects of resource concentration in urban areas, theRussian economy still has not finished its urbanizationprocess. Cities are able to develop effectively, creatinggrowth impulses for surrounding areas. At that,although the restructuring potential of urban settle�ments in favor of larger cities is still present, it is small.Obviously, one has to agree with researchers and poli�ticians who call for the active management of urbandevelopment by using tools of agglomeration forma�tion and support of medium and small cities.

ACKNOWLEDGMENTS

This work was supported by the Russian Founda�tion for Humanities, grant no. 11�02�159.

REFERENCES

1. State of the World’s Cities 2010/2011, UN HABITAT, 2010.2. Urban World, UN HABITAT, 2010, issue 4.3. Jacobs, J., The Economy of Cities, New York: Vintage,

1969.4. Henderson, J., Nijkamp, P., Thisse, J., et al., Handbook

of Regional and Urban Economics, North Holland,2004, vol. 4.

5. Rosenthal, S. and Strange, W., Evidence on the Natureand Sources of Agglomeration Economies, in Hand�book of Regional and Urban Economics, North Holland,2004, vol. 4.

6. Melo, P., Graham, D., and Noland, R., A Meta�Anal�ysis of Estimates of Urban Agglomeration Economies,Regional Science and Urban Economics, 2009, vol. 39,no. 3, pp. 332–342.

7. Nakamura, R., Agglomeration Economies in UrbanManufacturing Industries: A Case of Japanese Cities,Journal of Urban Economics, 1985, vol. 17, no. 1,pp. 108–124.

8. Ciccone, A. and Hall, R., Productivity and the Densityof Economic Activity, The American Economic Review,1996, vol. 86, no. 1, pp. 54–70.

9. Ciccone, A., Agglomeration Effects in Europe, Euro�pean Economic Review, 2002, vol. 46, no. 2, pp. 213–227.

10. Bekes, G. and Harasztosi, P., Agglomeration Premium andTrading Activity of Rms, CeFiG Working Papers, 2010.

11. Vakhitov, V., Are there Urbanization Economies in aPost�Socialist City? in Evidence from Ukrainian Firm�Level Data, KSE Working Papers, 2010.

12. Bruhart, M. and Mathys, N., Sectoral AgglomerationEconomies in a Panel of European Regions, RegionalScience and Urban Economics, 2008, vol. 38, no. 4,pp. 348–362.

13. Hill, F. and Gaddy, C., The Siberian Curse: How Com�munist Planners Left Russia out in the Cold, Washington:The Brookings Institution, 2003.

14. White, A., Internal Migration Trends in Soviet andPost�Soviet European Russia, Europe�Russia Studies,2007, vol. 59, no. 6, pp. 887–911.

15. Buckley, R. and Gurenko, E., Housing Demand inRussia: Rationing and Reform, Economics of Transi�tion, 1998, vol. 6, issue 1, pp. 197–210.

16. Lappo, G.M. and Polyan, P.M., Urbanization in Russiaby the End of XX Century, Mir Rossii, 1999, no. 4,pp. 35–47.

17. Nefedova, T.G. and Treivish, A.I., The Theory of Dif�ferential Urbanization and Urban Hierarchy in Russiaat the Turn of the XXI Century, in Problemy urbanizatsiina rubezhe vekov (Problems of Urbanization at the Turnof the Century), Moscow: MGU, 2002, pp. 71–87.

18. Zaionchkovskaya, Zh.A. and Nozdrina, N.V., Migra�tion Experience of Regional Population in the RussianCenters (a Case Study of a Sociological Survey in TenCities), Problemy Prognozirovaniya, 2008, no. 4, pp.98–112.

19. Leksin, V.N., “Regional capitals” in Economic andSocial Life of Russia, Voprosy Ekonomiki, 2006, no. 7,pp. 84–93.

20. Leksin, V.N., Regional Organization of Society and theTerritorial Structure of the State, Region: Ekonomika iSotsiologiya, 2010, no. 1, pp. 5–21.

21. Zubarevich, N.V., Russian Cities as Centers of Growth,Rossiiskoe Ekspertnoe Obozrenie, 2006, no. 2 (16),pp. 19–22.

22. Belkina, T.D., Minchenko, M.M., Nozdrina, N.N.,et al., Monitoring of the Status and Problems of Rus�sian Cities in the Years of Reforms, Problemy Prog�nozirovaniya, 2011, no. 2, pp. 83–102.

23. Shcherbakova, E.M., Global Demographic Barometer,Demoskop Weekly, 2010, nos. 407–408. http://demo�scope.ru/weekly/2010/0407/barom01.php. Accessed onAugust 22, 2011.

Table 2. Model evaluation results

Variable Coefficient Standard error P�value

Constant –509.2 261.2 0.052Fixed assets 0.443 0.007 0.000Share of urban population 21.02 7.038 0.003Square of the proportion of urban population

–0.195 0.047 0.000

Average city size 0.013 0.002 0.000Number of observations 711Number of regions 79

0.89Rwithin2

assessment of the urbanization impact on economic growth in russia

Documents