Regional Inequality in the Federal Budget Execution in Russian Regions

Abstract

Federal budget expenditures in regions are not reduced to intergovernmental fiscal transfers to the budgets of the constituent entities of the Russian Federation. A significant part of the federal budget is spent directly in regions to support the expenditure commitments of the Russian Federation. The study aims to describe inter-territorial redistribution of financial resources and assess the contribution of the federal budget to regional per capita consumption by analysing data on 76 Russian constituent entities for 2016-2019. The article ranks regions according to the indicators of the federal budget per capita, estimates the ratio of federal and regional budgetary resources and tests the hypothesis about the impact of federal expenditures on regional per capita consumption. The following negative effects and trends were identified. Regions receive significantly less federal funds than the federal budget; the number of constituent entities with federal budget surplus increased. The regional inequality in terms of the federal budget execution indicators is growing: the gap between the maximum and minimum values of federal budget revenues per capita by region increased from 62 to 74 times; the gap between per capita expenditures is about 6 times. The disincentive effect of redistribution is strengthening due to increased withdrawals of income generated in donor regions and reduced spending of federal resources in recipient regions. Federal budget expenditures amplify the inequality in regional per capita consumption. Maximum and minimum specific values of the total federal and regional budget expenditures in regions differ by more than 10 times. The identified effects lead to an increase in regional inequality in the Russian Federation. According to the research results, intergovernmental redistribution mechanisms should be improved taking into account direct federal budget expenditures in regions.