Regional Economics: Theory and Practice
 

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Fiscal decentralization and fiscal discipline

Vol. 17, Iss. 8, AUGUST 2019

Received: 16 May 2019

Received in revised form: 30 May 2019

Accepted: 30 June 2019

Available online: 15 August 2019

Subject Heading: ECONOMIC-MATHEMATICAL MODELING

JEL Classification: E62, H62, H77

Pages: 1557–1576

https://doi.org/10.24891/re.17.8.1557

Alekhin B.I. Russian State University for Humanities (RSUH), Moscow, Russian Federation
b.i.alekhin@gmail.com

https://orcid.org/0000-0002-9571-4836

Subject The article focuses on the fiscal discipline and regions' fiscal balance indicating their aptitude to comply with the fiscal discipline.
Objectives The research evaluates how fiscal decentralization influences the fiscal balance. Thus, I referred to official sources to compile the timed panel data on 81 subjects of the Russian Federation for 2006–2017.
Methods The array of variables was specified through the Granger causality test. The empirical model was evaluated with the systemic generalized method of moments.
Results Fiscal decentralization is not associated with the weakening fiscal discipline. Overcentralization makes fiscal constrains even more stringent by delegating the spending power implying the centralized finance, meticulous segregation of regions’ rights and obligations and federal financial control. I discovered the positive correlation of fiscal discipline and fiscal independence of regions. Regions were noted to have a better fiscal balance when the percentage of regional taxes increased in their revenue. Measured with a gap between the decentralization of expenditures and revenue, a decreasing disparity in fiscal decentralization also induces a better balance.
Conclusions and Relevance The findings echo the commitment to tightening fiscal restrictions of regions by making them more fiscally autonomous, specifying and standardizing the terms on which financial aid is provided to regions.

Keywords: fiscal decentralization, fiscal deficit, regions

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