Russia’s regions as winners and losers: political motives and outcomes in the distribution of federal government transfers^*

* This paper is a research output of the project implemented within NRU HSE’s Annual Thematic Plan for Basic and Applied Research ( “Regionalization of Russia’s Political Space: The Origins, Magnitude, and Evolution” research project).

ABSTRACT

Russia is a nation with a remarkably low degree of homogeneity across regions and a large number of regional imbalances or disparities. This article analyses which political factors affect the distributive politics of the federal government and how it contributes to equalizing the disproportions. The authors studied the annual regional distribution of federal transfers over the last decade. Part of these transfers was defined as ‘politically sensitive’ (subsidies, ‘other grants’) as they differ from the transfers relying on purely economic indicators (equalization grants) or linked to the partial devolution of power to the regions (subventions). The authors used such variables as regional wealth (precursor of bargaining power), governors’ political influence (measured by expert ratings), ethnic composition (buying loyalty of non-Russian regions), geopolitical vulnerability (areas claimed/influenced from abroad), and electoral campaigns (‘pork barrel’ and ‘loyalty reward’ politics). Most of these factors proved to be relevant.

KEYWORDS:

• Budget federalism
• intergovernmental relations
• capital transfers
• regional policy
• Russian federalism

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

* This paper is a research output of the project implemented within NRU HSE’s Annual Thematic Plan for Basic and Applied Research ( “Regionalization of Russia’s Political Space: The Origins, Magnitude, and Evolution” research project).

1 Wald and Hausman tests.

2 In this article we use more common definition such as ‘grants’ to identify those transfers which are called ‘dotations’ in Russian. The analysis does not include ‘other transfers’ which are small and too versatile addition to the transfers considered in this article.

3 All the models have been tested on multicollinearity with the variance inflation test (VIF) and obtained values not exceeding 2 for all the variables. It is widely known that there is much controversy about the threshold, but scholars tend to admit that the VIF-value should be below 4.

4 Furthermore, economic development is irrelevant for the other measures of the dependent variable (concentration and per capita).

5 Where ‘other grants’ are given as per capita (App. 5, Models 4-5).

6 The main beneficiary was Primorsky Krai, which received 25.3 bln. roubles more in comparison with the previous year.

7 Major international events perform an essential role in boosting transfers. Two Russian regions benefited as a result. They are Krasnodar Krai in the context of the 2014 Sochi Olympics and Primorsky Krai in light of the 2012 APEC summit in Vladivostok. However, Krasnodar Krai had been an important recipient of PSTs even before the decision on the Olympic Games venue. Moreover, the region can even be considered another Russian capital because Sochi is the second residence of the Russian President. Although Primorsky Krai is of less political importance, it was brought to the fore as Russia’s gates to the Pacific Ocean and the host of the APEC summit. In the midst of the construction boom, the two entities received the largest transfers for a couple of years prior to the remarkable international events. After a while, the amount of transfers started to decrease. As the events after the 2013 flood in the Far East showed, natural calamities can also cause a surge in transfers.