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Incentive Effects of Fiscal Equalization: Has Russian Style Improved?

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  • Lev Freinkman
  • Konstantin A. Kholodilin
  • Ulrich Thießen

Abstract

The effects of inter-government fiscal arrangements on variation in regional economic growth are analyzed for Russia, a country with large cross-regional differences and considerable fiscal redistribution. Moreover, fiscal reforms implemented in the first half of 2000s, which followed to some extent scientific advice, make analysis of this case particularly interesting. We observe that post-reform fiscal redistribution became more rational and this resulted in fewer incentive distortions. We found no negative association between federal transfers and regional growth. Furthermore, there are no major differences between donor and recipient regions in the way how inter-governmental fiscal arrangements influence regional growth. Overall, fiscal policy variables have become less important growth determinants than it was the case in the 1990s. Still further reforms in federalism arrangements would be desirable.

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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 912.

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Length: 32 p.
Date of creation: 2009
Date of revision:
Publication status: Published in: Eastern European Economics 49 (2011), No. 2, 5-29
Handle: RePEc:diw:diwwpp:dp912

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Keywords: Fiscal equalization; inter-governmental finance reform; Russian regions; extreme bounds analysis;

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