## Fiscal Federalism and Regional Performance

_IMF Working Papers, November 22, 2017_

## Source details

**Canonical URL:** [Fiscal Federalism and Regional Performance](https://www.imf.org/en/publications/wp/issues/2017/11/22/fiscal-federalism-and-regional-performance-45430)

## Other formats

- [Markdown version](/en/publications/wp/issues/2017/11/22/fiscal-federalism-and-regional-performance-45430/index.md)
- [Structured JSON version](/en/publications/wp/issues/2017/11/22/fiscal-federalism-and-regional-performance-45430/index.json)
- [Bundle manifest](/en/publications/wp/issues/2017/11/22/fiscal-federalism-and-regional-performance-45430/bundle-manifest.json)

## Bibliographic details
- Authors: Gabriel Di Bella, Oksana Dynnikova, Francesco Grigoli
- Published: November 22, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484330166.001

---

### Overview
- Sound regional policies are essential for balanced and sustained economic growth.
- The interaction of federal and regional policies with cross-regional structural differences affects 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.

### Main findings
- Federal transfers to regions contributed to reducing disparities arising from heterogeneous regional tax bases and fiscal revenues.
- Regions with initially lower per capita income were able to increase human and physical capital at higher rates following transfers.
- There is little evidence that transfers contributed to increased cross-regional growth synchronization.
- Federal transfers did not significantly improve regional fiscal sustainability.
- The lack of convergence in per capita real income across Russian regions in the last 15 years supports the conclusion about limited fiscal sustainability effects.

### Channels and mechanisms analyzed
- Interaction of federal and regional policies with structural differences across regions.
- Effects on human capital formation.
- Effects on physical capital formation.
- Effects on the business climate, private investment, market depth, and competition.
- Role of heterogeneous regional tax bases and fiscal revenues in driving disparities.

### Policy implications and interpretations
- Targeted federal transfers can reduce disparities caused by uneven tax bases and fiscal revenues by enabling faster accumulation of human and physical capital in lower-income regions.
- Transfers alone appear insufficient to achieve cross-regional growth synchronization.
- Transfers did not materially enhance regional fiscal sustainability over the period analyzed, suggesting complementary reforms may be necessary to foster long-term convergence.

---

## Content in this bundle

- **Fiscal Federalism and Regional Performance, WP/17/265, November 2017**
  - [Fiscal Federalism and Regional Performance, WP/17/265, November 2017 (Markdown version)](/-/media/files/publications/wp/2017/wp17265.pdf.md){rel="alternate" type="text/markdown"}
  - [Fiscal Federalism and Regional Performance, WP/17/265, November 2017 (PDF)](/-/media/files/publications/wp/2017/wp17265.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2017/11/22/fiscal-federalism-and-regional-performance-45430_