Andrey Yushkov (Leontief Centre, St. Petersburg): Transfer dependence, resource abundance, and regional economic performance: New evidence from Russia

Andrey Yushkov (Leontief Centre, St. Petersburg): Transfer dependence, resource abundance, and regional economic performance: New evidence from Russia

Abstract

The paper studies the empirical relationship between regional and municipal transfer dependence, natural resource abundance (measured not only by the share of mineral extraction industries in GRP but also by mineral tax collections in a region) and economic performance in Russian regions during 2005-2014. The results of the econometric analysis (dynamic panel data methods; Bayesian model averaging approach) suggest that there are different effects of transfer dependence on GRP growth in resource-rich and resource-poor regions. The most successful resource-poor regions in terms of economic growth are characterized by low transfer dependence and centralized budgets, while the fastest growing resource-rich regions have a higher share of transfers in budget revenues and more autonomous municipalities. This implies that transfer dependence has a negative effect on GRP growth in "normal" regions, while it has a positive relationship with growth in regions endowed with significant natural resources; for the municipal autonomy, the opposite is true. It can explain differences in fiscal incentives faced by these two groups of regions, especially in times of crises.

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