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

  • Zhuravskaya Ekatherina

    ()

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.

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Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 99-15e.

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Length: 42 pages
Date of creation: 11 Oct 2000
Date of revision:
Handle: RePEc:eer:wpalle:99-15e
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  1. Simon Johnson, 2000. "Tunneling," American Economic Review, American Economic Association, vol. 90(2), pages 22-27, May.
  2. 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.
  3. Roland, G. & Verdier, T., 1997. "Transition and the Output Fall," DELTA Working Papers 97-09, DELTA (Ecole normale supérieure).
  4. Yingyi Qian & Chenggang Xu, 1993. "Why Chinas Economic Reforms Differ: The M-Form Hierarchy and Entry/Expansion of the Non-State Sector," CEP Discussion Papers dp0154, Centre for Economic Performance, LSE.
  5. 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.
  6. 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.
  7. Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," NBER Working Papers 4097, National Bureau of Economic Research, Inc.
  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. Andrei Shleifer, 1996. "Government in Transition," Harvard Institute of Economic Research Working Papers 1783, Harvard - Institute of Economic Research.
  10. Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 995-1025.
  11. 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.
  12. 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.
  13. Treisman, Daniel, 1996. "The Politics of Intergovernmental Transfers in Post-Soviet Russia," British Journal of Political Science, Cambridge University Press, vol. 26(03), pages 299-335, July.
  14. Yingyi Qian & Cheng-Gang Xu, 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. A. Lavrov, 1996. "Fiscal Federalism and Financial Stabilization," Problems of Economic Transition, M.E. Sharpe, Inc., vol. 39(1), pages 83-94, May.
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