Vertical Fiscal Imbalance and Regional Economic Growth

This study examines the impact of fiscal decentralization on regional economic growth using panel data for 82 subjects of the Russian Federation for the period 2005-2018. General theoretical framework was drawn from the second-generation theory of fiscal federalism, and panel data econometrics sugge...

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Bibliographic Details
Published inFinancial Journal Vol. 12; no. 6; pp. 39 - 53
Main Author Alekhin, B.I.
Format Journal Article
LanguageEnglish
Published Financial Research Institute 01.12.2020
Subjects
conditional convergence
fiscal decentralization
regional economic growth
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Summary:This study examines the impact of fiscal decentralization on regional economic growth using panel data for 82 subjects of the Russian Federation for the period 2005-2018. General theoretical framework was drawn from the second-generation theory of fiscal federalism, and panel data econometrics suggested the appropriate empirical model and estimation method. The pooled mean group method was used to estimate an autoregressive distributed lags model based on Solow-Swan theory of economic growth. The results indicate that vertical fiscal gap has a negative and significant long-term impact on regional economic growth while vertical fiscal imbalance has a positive and significant long-term effect. The study is consistent with the modern theory of fiscal federalism, W.E. Oates’ matching hypothesis and previous empirical work using Russian data. The study also found evidence of conditional convergence of regional economies.
ISSN:2075-1990
2658-5332
DOI:10.31107/2075-1990-2020-6-39-53