The modern economy of Russia’s Baltic regions in the municipal context

Abstract

This article analyses the differentiation of municipalities at the municipal and urban district levels in the Kaliningrad and Leningrad regions based on their economic development and the response of their economies to the crises of 2020 and 2022. Emphasis is placed on the possibilities of conducting such assessments by merging Rosstat statistics with publicly available accounting and tax reporting data from the Federal Tax Service. The contribution also assesses the role of small businesses in municipal economies and their effect on employment, income levels of the population, and business activities. It is shown that over the ten years from 2012 to 2021, municipalities in the Kaliningrad region became more homogeneous in terms of the level of taxable income for individuals and individual entrepreneurs. In contrast, in the Leningrad Region, the level of differentiation remained unchanged, albeit with diverse income trends across municipalities. The study highlights municipalities’ specialization as a factor influencing changes in local companies’ revenue, particularly in 2022. The research illustrates that small businesses have a significantly smaller impact on the official income of the population compared to their role in employment. Furthermore, there are no discernible patterns in how municipalities differentiate based on the contribution of small businesses, as this can vary depending on the local economic development level and the ratio of urban to rural population. In particular, the decline of small businesses is noticeable in regions with high incomes and abundant employment opportunities at large organizations. This trend is also observed in economically challenged peripheral areas characterized by low demand for the products and services provided by small businesses.