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Federal Transfers in Russia: Their Impact on Regional Revenues and Incomes

Author

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  • Philippe Le Houerou

    (The World Bank)

  • Michal Rutkowski

    (The World Bank and Warsaw School of Economics)

Abstract

Since 1991, the Russian system of federal intergovernmental transfers has moved from equalizing to counter-equalizing, both in the case of regional revenue equalization and in the case of regional personal income equalization. This change happened despite increasing revenue and income differentials and despite an introduction of a special equalization fund in 1994. The counter-equalizing effect has been weaker in real terms than in nominal terms indicating that regional price differentials have impicitly been taken into account. The main reasons for increasing counter-equalization seem to be: (i) a relatively small share of transfers in the budget and GDP; (ii) flaws in the equalization formula resulting in the lack of sufficient focus on the poorest regions; and (iii) a non-transparent character of other transfers redistributing often to the most politically powerful regions. The major recommendations for the future are (i) to increase (dramatically) the transparency of expenditure assignment, and (ii) to keep the system simple.

Suggested Citation

  • Philippe Le Houerou & Michal Rutkowski, 1996. "Federal Transfers in Russia: Their Impact on Regional Revenues and Incomes," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 38(2-3), pages 21-44, September.
    • Handle: RePEc:pal:compes:v:38:y:1996:i:2:p:21-44
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    Citations

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    Cited by:

    1. Michael Paul Sacks, 1999. "Regional Inequality and Branch Employment in Russia Between 1990 and 1995," Post-Communist Economies, Taylor & Francis Journals, vol. 11(2), pages 149-159.
    2. Ms. Era Dabla-Norris & Mr. Shlomo Weber, 2001. "Regional Disparities and Transfer Policies in Russia: Theory and Evidence," IMF Working Papers 2001/199, International Monetary Fund.
    3. Thornton Matheson, 2005. "Does fiscal redistribution discourage local public investment?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 139-162, January.
    4. Jorge Martinez-Vasquez & Jameson Boex, 2001. "Russia's Transition to a New Federalism," World Bank Publications - Books, The World Bank Group, number 15248.
    5. Guanchun Liu & Jianbo Song & Chengsi Zhang, 2022. "Fiscal transfers and economic convergence: Evidence from China," The World Economy, Wiley Blackwell, vol. 45(9), pages 2924-2949, September.
    6. Freinkman, Lev & Haney, Michael, 1997. "What affects the Russian regional governments'propensity to subsidize?," Policy Research Working Paper Series 1818, The World Bank.

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