Transport Infrastructure Development and Total Factor Productivity at Firm Level: Assessment for Russian Cities

Abstract

Transport infrastructure development can be an important factor both for the competitiveness of the economy and for individual enterprises. Its improvement ensures the reduction of transport and logistics costs, increasing the connectivity of factor markets and productivity in the economy. Modern Russian studies of the effects of transport infrastructure development are more likely focused on higher-level analysis, and when trying to move to the micro level they still use aggregated indicators of transport infrastructure development without taking into consideration the actual configuration of routes and location of infrastructure facilities. Because of this, the differentiation of effects between territories—in particular in cities and outside them—may remain unaccounted for. The development of transport infrastructure stimulates agglomeration effects and productivity growth. The article presents an analysis of the impact of transport infrastructure development on enterprises’ total factor productivity (TFP) with the focus on Russian cities. It is the urban infrastructure that provides a significant share of short- and medium-distance transportation, including door-to-door delivery, and a major share of transportation for small and medium-sized firms in cities. Other modes of transportation (rail, water, and air) provide transportation over longer distances outside of cities. The use of microdata (financial statements of more than 230 thousand Russian companies and estimates of the level of transport infrastructure development based on the actual configuration of the road network) made it possible to focus on urban specifics. It is shown that the positive impact of more accessible transport infrastructure on TFP is more pronounced in cities than outside of them. Furthermore, the impact of transportation infrastructure is differentiated across sizes of cities and firms located in them.