Inter-regional insurance and redistribution--a non-parametric application to Russia

The paper examines inter-regional insurance and redistribution of Russia's fiscal system from 1995 to 2007. We use non-parametric methods for robustness and to tackle econometric problems of endogeneity and poolability. We will also use several specifications of variables. We find that the Russian inter-regional insurance system should be considered a stabilizing scheme against tax income and budget expenditure shocks, rather than against gross product or population income shocks, as typically assumed in Literature considering data of other countries. Furthermore, we find evidence that the differences in the insurance estimates are mainly due to Federation-wide policy changes rather than a result of asymmetric treatment of regions. Comparative Economic Studies (2012) 54, 633-660. doi: 10.1057/ces.2012.16; published online 3 May 2012 Keywords: inter-regional insurance, Russia, fiscal federalism, non-parametric analysis JEL Classifications: P35, H77, C14
INTRODUCTION According to Oates (1999), three roles for intergovernmental transfers are emphasized in fiscal Federalism literature: internalization of spillover benefits over jurisdictions, fiscal equalization across jurisdictions and an improved overall [...]