The Response of Federal Transfers to Measures of Social Need in Russia's Regions

Do Russian federal expenditures serve to reduce regional inequality, to insure against exogenous shocks, or to compensate regions for low tax capacity? Do sub-national governments appear to engage in strategic behavior in attempting to influence central governmental transfers? Using a panel data base coving Russia’s regions during the period after the Russian financial crisis, we find that federal administrative employment in a region has a strong positive effect on federal transfers to the region, but that there is little evidence that federal expenditures serve to reduce levels of regional inequality and no evidence that changes in federal transfers respond to changes in “social needs” during the period studied.