Priority development areas and employment in Russian cities

Abstract

The paper examines the impact of priority development areas (PDA) on economic diversification of Russia's cities. The research question of the work is this: has the creation of priority development areas contributed to a decrease in the share of employees in the city-forming enterprise and an increase in the number of operating firms? The main data sources are EMISS and SPARK-Interfax. The sample covers data from 279 cities for the period from 2015 to 2021. Since cities received PDA status in different years, the method of difference in differences with multiple periods is applied alongside panel matching. The work tests two main hypotheses. First, single-industry towns with PDA status show a decrease in the share of city-forming enterprise in the employment of population compared to towns without PDA status. Second, assigning a PDA status to a single-industry town ensures a significant increase in the number of operating enterprises. The findings reveal that assignment of priority development area status doesn’t reduce the share of workers in city-forming enterprise among the employed in a single-industry town, but significantly increases the number of existing firms (in the year of assignment of PDA status, the number of existing firms grows by 2–4 % and in two years by more than 8%.