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Vertical Fiscal Imbalance and Regional Economic Growth

Author

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  • Boris I. Alekhin

    (Russian State University for the Humanities, Moscow 125993, Russian Federation)

Abstract

This study examines the impact of fiscal decentralization on regional economic growth using panel data for 82 subjects of the Russian Federation for the period 2005-2018. General theoretical framework was drawn from the second-generation theory of fiscal federalism, and panel data econometrics suggested the appropriate empirical model and estimation method. The pooled mean group method was used to estimate an autoregressive distributed lags model based on Solow-Swan theory of economic growth. The results indicate that vertical fiscal gap has a negative and significant long-term impact on regional economic growth while vertical fiscal imbalance has a positive and significant long-term effect. The study is consistent with the modern theory of fiscal federalism, W.E. Oates’ matching hypothesis and previous empirical work using Russian data. The study also found evidence of conditional convergence of regional economies.

Suggested Citation

  • 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.
    • Handle: RePEc:fru:finjrn:200603:p:39-53
    DOI: 10.31107/2075-1990-2020-6-39-53
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    References listed on IDEAS

    as
    1. Singh, Nirvikar & Srinivasan, T.N., 2006. "Federalism and economic development in India: An assessment," MPRA Paper 12452, University Library of Munich, Germany, revised Aug 2008.
    2. 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.
    3. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
    4. K.P. Gluschenko (glu@nsu.ru ), 2010. "Income inequality in Russian regions: comparative analysis," Journal "Region: Economics and Sociology", Institute of Economics and Industrial Engineering of Siberian Branch of RAS, vol. 4.
    5. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
    6. Robin Boadway & Mr. Luc Eyraud, 2018. "Designing Sound Fiscal Relations Across Government Levels in Decentralized Countries," IMF Working Papers 2018/271, International Monetary Fund.
    7. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    8. A.V.Belov, 2008. "Financial decentralization and economic growth in regions of the Russian Federation," Journal "Region: Economics and Sociology", Institute of Economics and Industrial Engineering of Siberian Branch of RAS, vol. 1.
    9. Hatfield, John, 2006. "Federalism, Taxation, and Economic Growth," Research Papers 1929, Stanford University, Graduate School of Business.
    10. A. Yushkov., 2016. "Fiscal decentralization and regional economic growth: Theory, empirical studies, and Russian experience," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 2.
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    Cited by:

    1. Zhao Yang, 2023. "The Impact of Green Finance on High-Quality Economic Development in China: Vertical Fiscal Imbalance as the Moderating Effect," Sustainability, MDPI, vol. 15(12), pages 1-16, June.
    2. Boris Ivanovich Alekhin, 2022. "Demography and Per Head Income of the Russian Regions," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 1, pages 125-147.

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    More about this item

    Keywords

    fiscal decentralization; regional economic growth; conditional convergence;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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