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Russian Federalism: Economic Reform and Political Behavior

Polishchuk, Leonid (1996) Russian Federalism: Economic Reform and Political Behavior. Social Science Working Paper, 972. California Institute of Technology , Pasadena, CA. (Unpublished)

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This paper explores the implications from Russian federalism of the "new" interregional economic inequality produced by the structural distortions inherited from the central planning, and immaturity of the Russian markets. As a result, regional preferences over federal policies are widely diverse, which makes a nation-wide consensus hard to reach. It is argued in the paper that high correlation between political and regional divides in Russia renders the federation unstable and that the instability, in its turn, reproduces interregional disparities. These links are also illustrated by a simple equilibrium model presented in the Appendix. When the federal legislative bodies are "uprooted", captured by extra-territorial narrowly based interest groups, and lose their accountability to the voters, regional administrations emerge as representatives of their jurisdictions on the federal scene, and decision-making at the federal level assumes the form of federal-provincial bargaining. Such bargaining entails vast efficiency losses, since the federal administration is pressed to spend its resources for buying compliance of regional counterparts, instead of providing mandated public goods. It is stated in conclusion, that until markets integrate Russian regions and hence locally based political interests, the country will be failing to develop "market-preserving federalism" (Weingast, 1995), i.e. a federal system which stimulates economic growth and imposes self-enforcing restrictions on counterproductive discretion of public officials.

Item Type:Report or Paper (Working Paper)
Additional Information:An earlier version of this paper was presented at the conference "Hyper-Federalism: Russian Decentralization in Comparative Perspective", Princeton University, February 9-10, 1996, and at the workshop "Regionalism, Federalism, and the Russian Elections", Stanford University, February 21, 1996. The author is grateful to Peter Ordeshook, Alexandr Sobyanin, and Barry Weingast for useful discussions of the paper.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:972
Record Number:CaltechAUTHORS:20170815-171400624
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80457
Deposited By: Jacquelyn Bussone
Deposited On:16 Aug 2017 16:30
Last Modified:03 Oct 2019 18:31

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