IMF Working Papers

Fiscal Federalism and Regional Performance

By Gabriel Di Bella, Oksana Dynnikova, Francesco Grigoli

November 22, 2017

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Gabriel Di Bella, Oksana Dynnikova, and Francesco Grigoli. Fiscal Federalism and Regional Performance, (USA: International Monetary Fund, 2017) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Sound regional policies are essential for balanced and sustained economic growth. The interaction of federal and regional policies with cross-regional structural differences affect human and physical capital formation, the business climate, private investment, market depth, and competition. This paper summarizes the main elements of Russia's fiscal federalism, describes the channels through which it operates, and assesses the effectiveness of regional transfers in reducing regional disparities. The results suggest that federal transfers to regions contributed to reducing disparities arising from heterogeneous regional tax bases and fiscal revenues. This allowed regions with initially lower per capita income to increase human and physical capital at higher rates. There is little evidence for transfers contributing to increased cross-regional growth synchronization. The results also suggest that federal transfers did not significantly improve regional fiscal sustainability, a conclusion that is supported by the lack of convergence in per capita real income across Russian regions in the last 15 years.

Subject: Economic sectors, Fiscal federalism, Fiscal policy, Human capital, Income, Labor, National accounts, Personal income, Public sector

Keywords: Arrangements in Russia, Budget code, Convergence, Correlation coefficient, Federalism, Fiscal federalism, Fiscal federalism, Gas revenue, Growth rate, GRP growth correlation, Human capital, Income, Linear regression, Personal income, Personal property, Physical capital, Physical capital capital formation, Policy implication, Public sector, Reducing disparity, Regional policies, Russia, Russia's SNG, Transfers, Transfers to region, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/265
Stock No:

WPIEA2017265
ISBN:

9781484330166
ISSN:

1018-5941