Fiscal Decentralization in Rentier Regions: Evidence from Russia

SummaryThe paper argues that governments in regions that rely heavily on intergovernmental transfers and natural resource rents face serious distortions in their incentive structure. As a result, such regions tend to have more fiscally centralized governments than the regional characteristics would suggest. Data on Russian regions in the late 1990s—early 2000s support this hypothesis. Advancing intraregional fiscal decentralization in rentier regions could reduce policy distortions, and make the subnational environment more supportive of economic development.