Federalism with a Russian face: regional inequality, administrative capacity and regional budgets in Russia

The paper reviews fiscal federalism in Russian practice. Central control over sub-national budgets has tended to increase. In the classic literature on fiscal federalism such centralisation is potentially damaging to both static efficiency and growth. The paper reviews the propositions in that literature and the assumptions made in it, and notes that weak administrative capacity at sub-regional level, weak electoral competition and extreme unevenness of economic development across regions may provide grounds for greater central control than is treated as desirable in the established literature. The patterns of budgetary transfers from national to regional level are analysed and conclusions drawn about the effectiveness of the evolving fiscal-federal system in Russia.