Factors Influencing Economic Growth of Russian Cities

Cities economic growth appear to be the main driver of the overall economic growth of the most developing and developed countries. This fact paired with the lack of empirical research that studies the dynamic influence of factors on economic growth of Russian cities gave rise to the significance and importance of this topic (as determining such factors may help the policy makers to stimulate the economy on the municipal level and therefore stimulate the country economy through changes in municipal economies). The aim of this paper is to determine the factors that influence the economic growth of Russian cities with the population of less than 100,000 people. In order to do so, first the factors that may influence economic growth were determined using the most relevant theories and empirical researches. Then, a panel data analysis was conducted for a sample of 159 cities for a period from 2006-2013. Around 20 explanatory variables (connected with reviewed theory) and a proxy of economic growth through value added were used to determine the relevant factors. Finally, the most appropriate regression specification – period random effects was chosen using relevant statistical tests and the most common problems such us heteroscedasticity, autocorrelation, multicollinearity and reverse causality were addressed for this specification. The result of the analysis is that several variables appeared to be significant – such us growth in total investment of fixed capital (both government and private), crime growth rate, regional production index, workforce education index and monocity dummy