+7 925 966 4690, 9am6pm (GMT+3), Monday – Friday
ИД «Финансы и кредит»

JOURNALS

  

FOR AUTHORS

  

SUBSCRIBE

    
Economic Analysis: Theory and Practice
 

Non-earmarked intergovernmental equalization transfers: Complete equalization or proportional reduction of gaps? Theory and evidence from the budgetary system of the Komi Republic

Vol. 17, Iss. 8, AUGUST 2018

PDF  Article PDF Version

Received: 3 April 2018

Received in revised form: 25 May 2018

Accepted: 21 June 2018

Available online: 29 August 2018

Subject Heading: FINANCIAL STABILITY AND SOLVENCY

JEL Classification: H77

Pages: 1510–1527

https://doi.org/10.24891/ea.17.8.1510

Timushev E.N. Institute of Socio-Economic and Energy Problems of the North, Komi Science Center, Ural Branch of Russian Academy of Sciences, Syktyvkar, Komi Republic, Russian Federation
evgeny_timushev@mail.ru

ORCID id: not available

Importance The article addresses the methodology for distribution of non-earmarked equalization transfers in the inter-budgetary relations of a multilevel budget system.
Objectives The aim is to formulate conclusions on preferred alignment mechanism with regard to a choice between a methodology with absolute equalization of fiscal capacity and a proportional methodology.
Methods During the study, I reviewed literature and normative base, applied general scientific methods, and elements of higher mathematics.
Results The paper proves that the method of distributing the non-earmarked equalization transfers with absolute equalization of specific income of the least secured budgets is technically complex; it contradicts the concept of fiscal capacity leveling, implies factors of subsidy allocation that indirectly relate to the tasks of alignment, and has properties, which are evaluated as disadvantages by the theory of inter-budget alignment. The alternative is a proportional method. The calculated distribution of grants under the offered variant of the proportional method, using the budget system data of the Komi Republic showed an increase in the budget security and related specific subsidies of the least secured budgets, and, at the same time, a reduction in the final levels of budget security of leader budgets.
Conclusions The proportional method is able to solve alignment problems, observes the principle of growth of grants for the least secured budgets and restrictions imposed by the budget legislation of the Russian Federation.

Keywords: intergovernmental relations, intergovernmental transfer, equalization grant, absolute equalization, proportional method

References:

  1. Oates W.E. On the Theory and Practice of Fiscal Decentralization. IFIR Working Paper, 2006, No. 2006-05, 38 p.
  2. Musgrave R.A. The Theory of Public Finance: A Study in Public Economy. McGraw-Hill, 1959, 628 p.
  3. Tiebout C.M. A Pure Theory of Local Expenditures. Journal of Political Economy, 1956, vol. 64, no. 5, pp. 416–424.
  4. Qian Y., Weingast B.R. Federalism as a Commitment to Preserving Market Incentives. Journal of Economic Perspectives, 1997, vol. 11, no. 4, pp. 83–92. URL: Link
  5. Nazarov V. Mezhdunarodnyi opyt evolyutsii metodik raspredeleniya vyravnivayushchikh transfertov [International experience in the evolution of methods for equalization transfer distribution]. URL: Link (In Russ.)
  6. Boadway R., Shah A. (Eds). Intergovernmental Fiscal Transfers: Principles and Practice. Public Sector Governance and Accountability Series. Washington, D.C., World Bank, 2007, 624 p.
  7. Buchanan J.M. Federalism and Fiscal Equity. The American Economic Review, 1950, vol. 40, no. 4, pp. 583–599.
  8. Eapen A.T. Federalism and Fiscal Equity Reconsidered. National Tax Journal, 1966, vol. 19, no. 3, pp. 325–329.
  9. Shah A. A Practitioner's Guide to Intergovernmental Fiscal Transfers. In: Boadway R., Shah A. (Eds). Intergovernmental Fiscal Transfers: Principles and Practice. Public Sector Governance and Accountability Series. Washington, D.C., World Bank, 2007, pp. 1–53.
  10. Bird R.M., Smart M. Intergovernmental Fiscal Transfers: International Lessons for Developing Countries. World Development, 2002, vol. 30, iss. 6, pp. 899–912. URL: Link00016-5
  11. Figuieres Ch., Hindriks J., Myles G.D. Revenue Sharing versus Expenditure Sharing in a Federal System. International Tax and Public Finance, 2004, vol. 11, iss. 2, pp. 155–174. URL: Link
  12. Bird R.M., Tarasov A.V. Closing the Gap: Fiscal Imbalances and Intergovernmental Transfers in Developed Federations. Environment and Planning C: Government and Policy, 2004, vol. 22, iss. 1, pp. 77–102. URL: Link
  13. Klimanov V.V. [Transfer of expenditure obligations and challenges of their financial security in Russia]. Finansy = Finance, 2013, no. 5, pp. 9–16. (In Russ.)
  14. Trunin I., Katamadze A., Nazarov V. Mezhbyudzhetnye otnosheniya i subnatsional'nye finansy. V kn.: Rossiiskaya ekonomika v 2004 godu. Tendentsii i perspektivy. Vyp. 26 [Intergovernmental fiscal relations and subnational finance. In: Russian economy in 2004. Trends and outlooks. Issue 26]. Moscow, Gaidar Institute Publ., 2005, pp. 75–146.
  15. Deryugin A.N. [Regional Equalization: Are There Incentives to Development?]. Ekonomicheskaya politika = Economic Policy, 2016, no. 6, pp. 170–191. (In Russ.)
  16. Zhuravskaya E.V. Incentives to Provide Local Public Goods: Fiscal Federalism, Russian Style. Journal of Public Economics, 2000, vol. 76, iss. 3, pp. 337–368. URL: Link00090-0
  17. Mamedov A.A., Nazarov V.S. et al. Problemy mezhbyudzhetnykh otnoshenii v Rossii [Problems of Intergovernmental fiscal relations in Russia]. Moscow, Gaidar Institute Publ., 2012, 188 p.
  18. Siluanov A.G. Mezhbyudzhetnye otnosheniya v usloviyakh razvitiya federalizma v Rossii [Intergovernmental fiscal relations under federalism development in Russia]. Moscow, Delo Publ., 2011, 295 p.
  19. Spahn P.B. Equity and Efficiency Aspects of Interagency Transfers in a Multigovernment Framework. In: Boadway R., Shah A. (Eds). Intergovernmental Fiscal Transfers: Principles and Practice. Public Sector Governance and Accountability Series. Washington, D.C., World Bank, 2007, pp. 75–106.
  20. Ahmad E., Craig J. Intergovernmental Transfers. In: Ter-Minassian T. (Ed.). Fiscal Federalism in Theory and Practice. Washington, D.C., International Monetary Fund, 1997, pp. 73–107.

View all articles of issue

 

ISSN 2311-8725 (Online)
ISSN 2073-039X (Print)

Journal current issue

Vol. 23, Iss. 3
March 2024

Archive