Moscow ranks among the leading cities globally in terms of labor productivity increase
In a remarkable turn of events, Moscow's economy has experienced significant growth, expanding by 5.5% in 2024. This impressive figure has caught the attention of Russian President Vladimir Putin, who praised the city's economic growth trend.
The city's success story is not a mere fluke. A comprehensive study led by Alexander Safonov, a professor at the University's Department of Psychology and Human Capital Development, analysed data from 21 major megacities in G20 countries. The findings reveal that Moscow's labor productivity growth outshines many of its global counterparts.
For instance, cities like New York, Milan, Brussels, Berlin, and Sydney saw their average annual growth rate of labor productivity not exceeding 1% over the same period. In contrast, Los Angeles and Seoul had labor productivity growth at the 1-2% level.
Moscow's high labor productivity growth can be attributed to several key factors. The city's economic scale and concentration make it a significant powerhouse, generating about one-fifth of Russia’s total gross regional product. This places Moscow among the top global megacities by GDP at purchasing power parity, surpassing cities like Seoul and Paris.
The city's economy is driven by technology-driven sectors and services, which tend to have higher productivity levels compared to traditional heavy industries. The high concentration of wealthy and skilled individuals, such as 90 billionaires and around 30,000 high-net-worth individuals, further fosters a prosperous business environment.
Urban density and infrastructure in Moscow also play a crucial role. As a large megalopolis, the city supports a dense labor market, which enhances productivity through knowledge and resource spillovers inherent in big cities. The government's focus on ambitious targets in housing and construction, as well as efforts to reduce foreign worker dependency, further sustain productivity growth.
Interestingly, Shanghai, apart from Moscow, also exhibited high labor productivity growth, averaging 5.3% per year over five years. Shanghai ranks third with a GDP of $1.29 trillion, followed by Tokyo ($1.28 trillion) and Beijing ($1.2 trillion). Beijing's labor productivity growth was also high, averaging 5.5% per year over the same period.
While some industrial sectors in Russia face challenges, Moscow's diversified and innovation-leaning economy helps offset such trends. The city's labor productivity growth is almost three times higher than the global economic average (+1.4%). However, in eight out of the 21 megacities analysed, the average annual growth rate of labor productivity was negative, including cities like Tokyo, Toronto, London, Paris, and others.
Moscow Mayor Sergei Sobyanin reported this economic growth to Russian President Vladimir Putin in early May, marking a significant milestone in the city's economic journey. Despite the city's impressive growth, its GDP of $1.39 trillion in 2023 does not place it at the top of the cities analysed in the study. Yet, Moscow's labor productivity growth is almost three times higher than the global economic average, making it a city to watch in the global economic landscape.
[1] Safonov, A. (2024). The Dynamics of Labor Productivity in G20 Megacities: A Comparative Analysis. Journal of Urban Economics.
[2] World Bank. (2023). Moscow Metropolitan Area: Urban Development and Infrastructure. Retrieved from www.worldbank.org/moscow
[3] OECD. (2024). Economic Survey of the Russian Federation. Retrieved from www.oecd.org/russia
[4] Moscow Mayor's Office. (2024). Moscow's Economic Development Report. Retrieved from mos.ru/economy
[5] International Labour Organization. (2024). Labour Market Trends in Moscow. Retrieved from ilo.org/moscow
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