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Fiscal Decentralization and Soft Budget Constraints

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  • Timofeev Andrey

Abstract

Liberalization policies of transition have led to the mass reduction of enterprise subsidization which prevailed in socialist economies. However, in some sectors of the economy, subsidies associated with price controls remain due to "social" and "political" factors. Moreover in multi-tier governments, subnational levels seem to be more sensitive to these factors because of their proximity to the constituency. Thus decentralization of fiscal resources might interfere with the elimination of re-sidual subsidies. This research establishes a link between fiscal decentralization and the propensity of local governments to subsidize enterprises. The link is tested empirically on a panel of 72 Russian regions over the period 1995 – 1997.

Suggested Citation

  • Timofeev Andrey, 2002. "Fiscal Decentralization and Soft Budget Constraints," EERC Working Paper Series 01-12e, EERC Research Network, Russia and CIS.
  • Handle: RePEc:eer:wpalle:01-12e
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    Cited by:

    1. Sebastian Eckardt & Jorge Martinez-Vazquez & Andrey Timofeev, 2014. "Efficiency Cost of Fiscal Equalization: The Case of Belarus," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1401, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Libman, Alexander, 2008. "Federalism and regionalism in transition countries: A survey," MPRA Paper 29196, University Library of Munich, Germany.

    More about this item

    Keywords

    Russia; fiscal decentralization; local government; transition; subsidies; price control;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • P35 - Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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