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Incentive Effects of Fiscal Equalization: Has Russian Style Improved?

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Author Info
Lev Freinkman
Konstantin A. Kholodilin
Ulrich Thießen

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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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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
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Handle: RePEc:diw:diwwpp:dp912

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

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Find related papers by JEL classification:
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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  6. Yuriy Gorodnichenko & Jorge Martinez-Vazquez & Klara Sabirianova Peter, 2008. "Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia," NBER Working Papers 13719, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Emili Tortosa Ausina & Diego Prior & María Teresa Balaguer-Coll, 2004. "On The Determinants Of Local Government Performance: A Two-Stage Nonparametric Approach," Working Papers. Serie EC 2004-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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  15. Desai, Raj M. & Freinkman, Lev & Goldberg, Itzhak, 2005. "Fiscal federalism in rentier regions: Evidence from Russia," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 814-834, December. [Downloadable!] (restricted)
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