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Distribution of Financial Resources Within the Budget System of the Russian Federation and Regions’ Economic Growth

Author

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  • Artyom Gennadyevich Isaev

    (Economic Research Institute FEB RAS)

Abstract

This article examines the impact of central government transfers and other sources of regional budget revenues (income tax and property tax) on per capita GRP growth in Russian regions. Analysis is based on official data of 78 regions for the period 2005-2014. The results indicate that transfers, while intending to be an instrument of regional incomes equalization, are negatively associated with economic growth of Russian regions, which contrasts with other estimates of federal transfers’ impact on regional economic growth in Russia. This phenomenon can be explained by high rate of social expenditures in regional governments’ spending. At the same time there is positive relationship between regional budget’s investment and economic growth that indicates significant role of public goods for regional economic development. This study can be considered as confirmation of those conclusions concerning impact of fiscal decentralization on economic growth of Russian regions which claim that current system of intergovernmental relations on sub-national level cannot embody the benefits of fiscal federalism as a principle of effective regional development. Significant factors of regional per capita GRP growth are own sources of region’s budget revenues which reflect costs of doing business. So the rise in property taxes retards economic growth in a region. For the regional authorities it makes sense to operate more flexibly with this tool, especially in periods of economic recession when inflow of corporate income tax to budget tends to decrease.

Suggested Citation

  • Artyom Gennadyevich Isaev, 2016. "Distribution of Financial Resources Within the Budget System of the Russian Federation and Regions’ Economic Growth," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 4, pages 61-74.
    • Handle: RePEc:far:spaeco:y:2016:i:4:p:61-74
    DOI: 10.14530/se.2016.4.061-074
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    Citations

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    Cited by:

    1. Alexander Myasnikov, 2018. "Analysis of the Determinants of Total Factor Productivity in Russian Regions," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(4), pages 1168-1180.
    2. Alexey F. Pasynkov, 2020. "Compilation of regional financial balances for the 'General Governance' sector in the Ural Federal District," R-Economy, Ural Federal University, Graduate School of Economics and Management, vol. 6(4), pages 251-260.
    3. Malkina, M. Yu., 2018. "The determinants of budget revenues of Russian regions," R-Economy, Ural Federal University, Graduate School of Economics and Management, vol. 4(3), pages 95-104.
    4. Boris I. Alekhin, 2020. "Vertical Fiscal Imbalance and Regional Economic Growth," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 39-53, December.

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