Abstract
This paper empirically analyses the effect of spatial concentration of economic activities on enterprise productivity, using Russian firm-level data from 1999 to 2008. Panel data allows us to control for endogeneity biases associated with estimation of agglomeration economies, using fixed effects method. Our results show that Russian firms benefit from localisation and urbanisation economies, as well as from home market potential, and that these benefits vary across industries and cities. We also find that localisation benefits are not well internalised by firms in their location choice, i.e., there is a difference between the pattern of location that would maximise productivity gains and the observed one. It shows that regional policy could help in approaching optimum level of localisation economies.
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