Features of Anti-crisis Financial Support for Regions in Russia

Abstract

The article examines the Russian central government’s choice of anti-crisis support measures for its regions. Federal transfers and budget loans, which have been the two most common instruments for providing fiscal assistance to support regions in crisis, are studied in detail. Financial assistance to the regions enables regional budgets to remain balanced, but it may also weaken fiscal incentives. Econometric analysis is applied to assess the effects of supporting regional budgets when their tax and non-tax revenues decreased during the period from 2006 to 2020. Special attention is paid to identifying the differences in support for the regions during the crises of 2008–2009, 2014–2015 and 2020, and the differences in the policies pursued during those crisis periods are subjected to various tests. The results of evaluating the econometric models using data from 2006 to 2020 indicated that there was no significant weakening of fiscal incentives outside the crisis periods. Support increased by no more than 20 kopecks per 1 ruble when regional tax and non-tax revenues decreased outside the crisis periods, although that result is not replicable across changes in the regions sampled and in specifications. The federal support policy for the regions in 2009 and 2020, in contrast to 2015, was mostly a response to the amount of the shortfalls in regional budget revenues. The distribution of transfers in 2020 was largely aimed at compensating for reductions in budget revenues. The paper also highlights the difference in the federal policy depending on a given region’s budget capacity: support for wealthy regions was aimed at compensating for shortfalls in income, while support for low-income regions did not correlate with reduced income. The results of this study are correlated with earlier estimates based on Russian data and extend them with an analysis of the 2020 crisis