Fiscal Federalism in Rentier Regions: Evidence from Russia

21 Pages Posted: 30 May 2006 Last revised: 21 Mar 2014

See all articles by Raj M. Desai

Raj M. Desai

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS); The Brookings Institution

Lev Freinkman

National Research University Higher School of Economics; World Bank - The International Bank for Reconstruction and Development (IBRD)

Itzhak Goldberg

CASE - Center for Social and Economic Research; Fraunhofer Center for Central and Eastern Europe

Abstract

When does sub-national fiscal autonomy prompt regional growth and recovery and, under what conditions, does it have adverse effects? We argue that unearned income streams, particularly in the form of revenues from natural resource production or from budgetary transfers from the central government, transform regions dependent on these income sources into rentier regions. Governments in these regions can use local control over revenues and expenditures to shelter certain firms, i.e., natural resource producers or loss-making enterprises, from market forces. Using fiscal data from 80 Russian regions from 1996 to 1999, we test this hypothesis in both cross-sectional and panel specifications. Our results indicate that tax retention, which is a proxy for fiscal autonomy, has had a positive effect on regional reform and investment since the break-up of the Soviet Union. However, we also find that this effect decreases as rentable income streams to regions increase.

Keywords: taxation, intergovernmental relations, socialist systems

JEL Classification: H2, H7, P2

Suggested Citation

Desai, Raj M. and Freinkman, Lev and Goldberg, Itzhak, Fiscal Federalism in Rentier Regions: Evidence from Russia. Journal of Comparative Economics, Vol. 33, No. 4, pp. 641-854, December 2005 , Available at SSRN: https://ssrn.com/abstract=905097

Raj M. Desai (Contact Author)

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS) ( email )

Washington, DC 20057
United States

The Brookings Institution ( email )

1775 Massachusetts Ave., NW
Washington, DC 20036
United States

Lev Freinkman

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

World Bank - The International Bank for Reconstruction and Development (IBRD) ( email )

Washington, DC 20433
United States

Itzhak Goldberg

CASE - Center for Social and Economic Research ( email )

Al. Jana Pawła II 61/212
Warsaw, 01-031
Poland

Fraunhofer Center for Central and Eastern Europe ( email )

Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
31
Abstract Views
604
PlumX Metrics