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Working paper

How Space Channels Wage Convergence: The Case of Russian Cities

Existing empirical work on the growth of Russian regions mostly covers a short time period and considers only regional-level data, while city-level spatial data of the post-reform era remain largely ignored. Using city-level geo-coded data covering 997 cities and towns from 1996 until 2013, I find sigma- and beta-convergence across Russian cities in wages. City wages during the period under consideration display significant and positive spatial autocorrelation. Spatial Durbin models of the Barro regression are estimated using Markov chain Monte Carlo methodology. Estimates of the spatial models for different weight matrices indicate that the city wage growth is significantly affected by wage growth rates in neighboring cities, after conditioning on initial wages.