IDEAS home Printed from https://ideas.repec.org/p/eer/wpalle/99-15e.html
   My bibliography  Save this paper

Incentives to Provide Local Public Goods: Fiscal Federalism, Russian Style

Author

Listed:
  • Zhuravskaya Ekatherina

Abstract

Based on unique data set on Russian city budgets, this paper shows that revenue sharing between regional and local governments provides local governments with no incentive to increase tax base or provide public goods. Any change in local government’s own revenues is almost entirely offset by changes in shared revenues. This leads to governmental over-regulation of private businesses. It is shown that fiscal incentives are a determinant of the formation of private business and the efficiency of public goods provision. The Russian federalism is compared to Chinese federalism, where fiscal incentives reputedly are stronger in many provinces.

Suggested Citation

  • Zhuravskaya Ekatherina, 2000. "Incentives to Provide Local Public Goods: Fiscal Federalism, Russian Style," EERC Working Paper Series 99-15e, EERC Research Network, Russia and CIS.
    • Handle: RePEc:eer:wpalle:99-15e
    as

    Download full text from publisher

    File URL: https://eercnetwork.com/default/download/creater/working_papers/file/b9d8e1b2966975720c34ce59b92fa6d2f67f8d1d.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philippe Aghion & Oliver D. Hart & John Moore, 1994. "The Economics of Bankruptcy Reform," NBER Chapters, in: The Transition in Eastern Europe, Volume 2, Restructuring, pages 215-244, National Bureau of Economic Research, Inc.
    2. Simon Johnson, 2000. "Tunneling," American Economic Review, American Economic Association, vol. 90(2), pages 22-27, May.
    3. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
    4. Yingyi Qian & Chenggang Xu, 1993. "Why China's economic reforms differ: the M‐form hierarchy and entry/expansion of the non‐state sector," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(2), pages 135-170, June.
    5. Gérard Roland & Thierry Verdier, 1999. "Transition and the output fall," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(1), pages 1-28, March.
    6. Clifford Gaddy & Barry W. Ickes, 1998. "To Restructure or Not to Restructure: Informal Activities and Enterprise Behavior in Transition," William Davidson Institute Working Papers Series 134, William Davidson Institute at the University of Michigan.
    7. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
    8. Jin, Hehui & Qian, Yingyi & Weingast, Barry R., 2005. "Regional decentralization and fiscal incentives: Federalism, Chinese style," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1719-1742, September.
    9. Shleifer, Andrei, 1997. "Government in transition," European Economic Review, Elsevier, vol. 41(3-5), pages 385-410, April.
    10. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W., 1997. "Privatizing Russia," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522284, February.
    11. Mr. Vivek B. Arora & Mr. John Norregaard, 1997. "Intergovernmental Fiscal Relations: The Chinese System in Perspective," IMF Working Papers 1997/129, International Monetary Fund.
    12. Treisman, Daniel, 1996. "The Politics of Intergovernmental Transfers in Post-Soviet Russia," British Journal of Political Science, Cambridge University Press, vol. 26(3), pages 299-335, July.
    13. Yingyi Qian & Barry R. Weingast, 1996. "China's transition to markets: market-preserving federalism, chinese style," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(2), pages 149-185.
    14. Qian, Yingyi & Xu, Cheng-Gang, 1993. "Why China's economic reforms differ: the m-form hierarchy and entry/expansion of the non-state sector," LSE Research Online Documents on Economics 3755, London School of Economics and Political Science, LSE Library.
    15. Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 995-1025.
    16. John Knight & Li Shi, 1999. "Fiscal decentralization: Incentives, redistribution and reform in China," Oxford Development Studies, Taylor & Francis Journals, vol. 27(1), pages 5-32.
    17. A. Lavrov, 1996. "Fiscal Federalism and Financial Stabilization," Problems of Economic Transition, Taylor & Francis Journals, vol. 39(1), pages 83-94.
    18. Johnson, Simon & Kaufmann, Daniel & Shleifer, Andrei, 1997. "The unofficial Economy in Transition," Scholarly Articles 30728045, Harvard University Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Djankov, Simeon & Glaeser, Edward & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2003. "The new comparative economics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 595-619, December.
    2. Olivier Blanchard & Andrei Shleifer, 2001. "Federalism With and Without Political Centralization: China Versus Russia," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 1-8.
    3. Yingyi Qian, 1999. "The Institutional Foundations of China's Market Transition," Working Papers 99011, Stanford University, Department of Economics.
    4. Zhuravskaya, Ekaterina & Lambert-Mogiliansky, Ariane & Sonin, Konstantin, 2000. "Capture of Bankruptcy: Theory and Evidence from Russia," CEPR Discussion Papers 2488, C.E.P.R. Discussion Papers.
    5. Blanchard, Olivier & Shleifer, Andrei, 2001. "Federalism With and Without Political Centralization:China Versus Russia," Scholarly Articles 30747169, Harvard University Department of Economics.
    6. Катышев П.К. & Полтерович В.М., 2006. "Политика Реформ, Начальные Условия И Трансформационный Спад," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 42(4), октябрь.
    7. Wang, Qian & Wong, T.J. & Xia, Lijun, 2008. "State ownership, the institutional environment, and auditor choice: Evidence from China," Journal of Accounting and Economics, Elsevier, vol. 46(1), pages 112-134, September.
    8. Jin, Hehui & Qian, Yingyi & Weingast, Barry R., 2005. "Regional decentralization and fiscal incentives: Federalism, Chinese style," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1719-1742, September.
    9. Hongbin Li & Lingsheng Meng & Junsen Zhang, 2005. "Why Do Entrepreneurs Enter Politics?," Discussion Papers 00009, Chinese University of Hong Kong, Department of Economics.
    10. Berkowitz, Daniel & Li, Wei, 2000. "Tax rights in transition economies: a tragedy of the commons?," Journal of Public Economics, Elsevier, vol. 76(3), pages 369-397, June.
    11. Wilson, Ross, 2016. "Does Governance Cause Growth? Evidence from China," World Development, Elsevier, vol. 79(C), pages 138-151.
    12. Evgeny Yakovlev & Ekaterina Zhuravskaya, 2007. "Deregulation of Business," Working Papers w0097, Center for Economic and Financial Research (CEFIR).
    13. Chen, Kang, 2004. "Fiscal centralization and the form of corruption in China," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1001-1009, November.
    14. Johnson, Simon & Kaufmann, Daniel & McMillan, John & Woodruff, Christopher, 2000. "Why do firms hide? Bribes and unofficial activity after communism," Journal of Public Economics, Elsevier, vol. 76(3), pages 495-520, June.
    15. Barbara Krug & Alexander Libman, 2015. "Commitment to local autonomy in non-democracies: Russia and China compared," Constitutional Political Economy, Springer, vol. 26(2), pages 221-245, June.
    16. Wilson, Ross, 2015. "Does Governance Cause Growth? Evidence from China," Working Papers 2015:14, Lund University, Department of Economics.
    17. Liangliang Liu, 2021. "Fiscal decentralization and the imbalance between consumption and investment in China," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(1), pages 1-17, February.
    18. Longjin Chen & Jian Huang & Jianjun Li, 2017. "Fiscal Decentralization, Satisfaction with Social Services, and Inequality Under the Hukou System," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(1), pages 377-394, May.
    19. Cull, Robert & Xu, Lixin Colin & Yang, Xi & Zhou, Li-An & Zhu, Tian, 2017. "Market facilitation by local government and firm efficiency: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 460-480.
    20. Gorodnichenko, Yuriy & Sabirianova Peter, Klara, 2007. "Public sector pay and corruption: Measuring bribery from micro data," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 963-991, June.

    More about this item

    Keywords

    Federalism; Russia; local government; transition;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eer:wpalle:99-15e. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.eercnetwork.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anton Pashchenko (email available below). General contact details of provider: http://www.eercnetwork.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.