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The Influence of Intergovernmental Fiscal Relations on Regional Economic Growth
[Влияние Межбюджетных Отношений На Экономический Рост В Регионах]

Author

Listed:
  • Arlashkin, Igor (Арлашкин, Игорь)

    (Russian Presidential Academy of National Economy and Public Administration)

  • Deryugin, Alexander (Дерюгин, Александр)

    (Russian Presidential Academy of National Economy and Public Administration)

  • Filippova, Irina (Филиппова, Ирина)

    (Lomonosov Moscow State University)

Abstract

The article examines the impact on regional economic growth from intraregional fiscal decentralization and the structure of regional financial assistance to local public budgets. For this purpose, a panel regression was arrived at using the data from Russia’s regions for 2011–2021 or for 2015– 2021. The resulting calculations demonstrate that the relationship between the degree of decentralization of expenditures and the rate of economic growth is ∩-shaped. While an increase in the decentralization of expenditures can have a positive effect on economic growth, that holds true only for those regions in which the initial level of decentralized expenditures is significantly below 30%. However, there is no significant relationship between the degree of decentralization of taxation and the rate of economic growth. The impact on GRP growth of individual instruments for providing financial assistance to local budgets turned out to be different for wealthier and low-income regions. In low-income regions, regional financial assistance has a negative effect on economic growth; that is, economic growth in such regions should be fostered by increasing the revenue of the local budgets (or revenue base). In addition, for low-income regions, targeted financial assistance tends to dampen economic growth; therefore, non-targeted financial assistance to such regions is preferable. Capital subsidies accelerate economic growth, and this effect is more pronounced in wealthier regions. However, neither increasing tax sharing by a few percentage points, nor an overall increase in the level of tax decentralization, showed a significant impact on economic growth.

Suggested Citation

  • Arlashkin, Igor (Арлашкин, Игорь) & Deryugin, Alexander (Дерюгин, Александр) & Filippova, Irina (Филиппова, Ирина), 2025. "The Influence of Intergovernmental Fiscal Relations on Regional Economic Growth [Влияние Межбюджетных Отношений На Экономический Рост В Регионах]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, issue 1, pages 56-83.
    • Handle: RePEc:rnp:ecopol:ec2503
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    References listed on IDEAS

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    1. Kass Forman & Sean Dougherty & Hansjörg Blöchliger, 2020. "Synthesising good practices in fiscal federalism: Key recommendations from 15 years of country surveys," OECD Economic Policy Papers 28, OECD Publishing.
    2. Brueckner, Jan K., 2006. "Fiscal federalism and economic growth," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2107-2120, November.
    3. Canavire-Bacarreza, Gustavo & Martinez-Vazquez, Jorge & Yedgenov, Bauyrzhan, 2020. "Identifying and disentangling the impact of fiscal decentralization on economic growth," World Development, Elsevier, vol. 127(C).
    4. Oshchepkov, Aleksey & Lehmann, Hartmut & Silvagni, Maria Giulia, 2023. "Regional convergence in Russia: Estimating an augmented Solow model," Economic Systems, Elsevier, vol. 47(4).
    5. Ulrich Thießen, 2000. "Fiscal Federalism in Western European and Selected Other Countries: Centralization or Decentralization? What Is Better for Economic Growth?," Discussion Papers of DIW Berlin 224, DIW Berlin, German Institute for Economic Research.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    gross regional product; financial assistance; local budgets; decentralization;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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