Model for Assessing the Benefits of Living in Russian Cities

Abstract

At the present stage of globalisation, the phenomenon of urban agglomerations and the need to create conditions to fully realise agglomeration effects require methodological approaches and models for assessing the factors of location efficiency in Russian cities. The study aims to assess the aggregate function of urban production of the effectiveness of benefits of living by using the indicator “the cost per square meter of real estate in the primary market”. The presented author’s methodology for assessing the aggregate function of urban production of average location benefits differs from traditional approaches: it includes an analysis of conditions for the interaction of independent variables and dummy cities, as well as a model with dummy variables. Cities with a population of more than 100 thousand people (megacities, big and large cities) of the Central and Volga Federal Districts in the period 2001-2020 were examined. The testing of the proposed method on the entire sample of cities showed that an increase in high urban functions promotes economic growth of a city and enhances its attractiveness, with a pronounced agglomeration effect. Analysis of properties of large cities in the Central Federal District revealed the inverted U-shaped relationship between location efficiency and the city size, reflecting the disadvantage of the excessively large size. The simulation results demonstrate that high urban functions also play an important role in explaining increasing returns. In order to turn the risk of diminishing returns into the agglomeration economy, it is necessary to invest in high-performance workplaces, research and development. The findings can be used to create and implement policies for the development of urban agglomerations in the Russian Federation.