Central Control of Regional Budget [E-Book]: Theory with Applications to Russia / John Litwack
Motivated by the recent experience in the Russian Federation, this paper examines the implications of imposing central control on the budgetary activities of a subnational government. In a highly stylised multi-task principal-agent model (Holmstrom and Milgrom (1991)), a central government cannot di...
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Full text |
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Personal Name(s): | Litwack, John. |
Imprint: |
Paris :
OECD Publishing,
2001
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Physical Description: |
27 p. ; 21 x 29.7cm. |
Note: |
englisch |
DOI: |
10.1787/560325048014 |
Series Title: |
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OECD Economics Department Working Papers ;
275 |
Keywords: |
Economics Russian Federation |
Motivated by the recent experience in the Russian Federation, this paper examines the implications of imposing central control on the budgetary activities of a subnational government. In a highly stylised multi-task principal-agent model (Holmstrom and Milgrom (1991)), a central government cannot directly monitor the informal budgetary operations of a regional administration, but seeks to improve fiscal policies by exerting control over a "formal" regional budget and imposing (limited) costs on informal behaviour. In the static case of the model, the control of subnational budgetary operations by a benevolent central government may increase social welfare, but at the expense of higher (implicit and explicit) taxation of economic organisations in the region, lower output, and a strong orientation of informal policies toward rent seeking activities. The additional imposition of costs on regions for conducting informal budgetary operations has multiple (indeterminate) effects in ... |