Intergovernmental relations in Nigeria: improving service delivery in core sectors

According to the Nigerian constitution, main public sector responsibilities are split across various government levels. Thus, no sole government could deliver radical improvements in service delivery on its own, which means that coordination and cooperation are pre-requisites. However, the existing mechanisms and institutions for inter-governmental policy coordination are weak and need strengthening. This paper suggests the following priority directions for reforming inter-governmental financing arrangements in Nigeria: a. more attention to the equity dimension of revenue sharing b. strengthening government accountability for utilization of public money in general, and for use of a common pool of funds such as the Federation Account in particular, and c. introduction of specific grant schemes directly linked to expansion of sub-national government financing in key sectorsNigeria, Fiscal federalism, Policy coordination, Horizontal inequality, conditional grants

ROLE OF THE DIASPORAS IN TRANSITION ECONOMIES: LESSONS FROM ARMENIA

The paper develops additional economic arguments to emphasize the potential importance of the Diasporas’ contribution to economic transformation of former socialist economies. At the same time, it argues that so far this potential has been grossly underutilized, especially in the economies of the Former Soviet Union (FSU). Based on the analysis of such underutilization for a case of Armenia, the paper provides a set of simple recommendations on how to rationalize the Diaspora’s involvement and assistance to home countries in the course of transition.diaspora, Armenia, transition economies, diaspora mobilization

What determines the extent of fiscal decentralization ? The Russian paradox

The paper provides an empirical analysis of the determinants of fiscal decentralization within Russian regions in 1994-2001. The conventional view that more decentralized governments are found in regions and countries with higher income, higher ethnolinguistic fractionalization, and higher levels of democracy is not supported by the data. This motivates a more refined analysis of the determinants of decentralization that points to the link between decentralization and the structure of regional government revenue: access to windfall revenues leads to a more centralized governance structure. The degree of decentralization also depends positively on the level of urbanization and regional size and negatively on income and general regional development indicators such as the education level.National Governance,Banks&Banking Reform,Municipal Financial Management,Economic Theory&Research,Regional Governance

Costing-out the Big Bang: Impact of external shocks on the Armenian economy at the outset of transition

This paper explores factors of economic decline in the small republican economies of the former USSR. It develops quantitative estimates of the costs of major transitional shocks for Armenia during the early transition, including the direct impact of terms of trade shock (price shock), direct impact of external demand shock (market loss), direct impact of fiscal shock (loss of transfers), as well as secondary effects of all the above shocks, defined as a further decline in macroeconomic aggregates due to a weakening of the overall domestic demand. These estimates are obtained within a single framework, built on a detailed input-output model for Armenia, and using the actual 1987 data. Our estimates suggest that the cumulative impact of the external shocks of the early 90-s amounted to the equivalent of 85 percent of the pre-transition GDP, and both price and demand shocks were highly significant. At the same time, the fiscal shock was much less important in Armenia due to its lower dependence on transfers from the union budget. The actual economic decline in Armenia in the first part of the 90-s was less severe than the model’s projections. We attribute this difference to a positive impact of market reforms on economic incentives.Armenia, costs of transition, USSR collapse, external shock

Decentralization in regional fiscal systems in Russia - trends and links to economic performance

To shed light on decentralization in Russia, the authors examine intergovernmental fiscal relations within regions. To analyze trends, they review channels of fiscal allocation within regions - tax sharing and local transfer schemes. To evaluate the potential impact of various fiscal decentralization patterns on regional economic performance (including growth and the budget deficit), the authors study data on the structure of 89 Russian consolidated regional budgets for 1992-96. They find that local governments'relative share of Russia's consolidated budget, although substantive (roughly a quarter of the total budget), did not expand after 1994. The federal government's relative role in financing public goods and services declined as the relative role of local governments increased substantially. Local governments collected more revenues in 1996 (6.4 percent of GDP) and spent more than regional governments. They also substantially increased social financing (including health, education, and social protection). Russia made no progress toward a more transparent system for tax assignments. The average level of expenditure decentralization is similar for ethnically Russian regions and national republics and"okrugs"but revenue arrangements differ greatly."True"decentralization has taken place in"oblasts"and"krais"where local authorities are provided with a bigger share of sub-national tax revenues. A redistribution model applies in republics and autonomous okrugs, where greater local outlays have been financed through larger transfers from regional governments. Regions near each other tend to have similar budget arrangements - the result of intensive interactions between neighbors and probably supported by the activities of regional associations. The size of a region's territory does not influence decentralization outcomes. Fiscal decentralization seems positively related to the share of education spending in regional budgets. And regions with more decentralized finances tend to experience less economic decline. But budget control is weaker in more decentralized regions. Instability and lack of transparency in intergovernmental fiscal relations provide sub-national governments little incentive for responsible fiscal policy. Further decentralization without greater transparency could bring greater debt and deficits.Urban Economics,Public Sector Economics&Finance,Public&Municipal Finance,Banks&Banking Reform,Municipal Financial Management,Municipal Financial Management,Public&Municipal Finance,National Governance,Public Sector Economics&Finance,Banks&Banking Reform

Armenia: What drives first movers and how can their efforts be scaled up?

The paper examines ways to expand the contribution of the Armenian diaspora to Armenia’s long-term development agenda. It identifies factors that could explain the involvement and dynamics of a small group of entrepreneurs from the diaspora who have been active in and with Armenia. Based on these findings, it develops recommendations, consistent with the diaspora’s institutional capabilities, for increasing the number of such business activists and transforming diaspora efforts from humanitarian relief campaigns to business initiatives and development projects. The findings are based on detailed interviews with a group of prominent diaspora activists.diaspora, Armenia, diaspora mobilization, diaspora expertise for development

What affects the Russian regional governments'propensity to subsidize?

Subsidies funded by Russia's regional governments represented about 5.2 percent of GDP in 1995, almost triple the 2 percent of GDP in subsidies funded by the federal government. Regional policies vary greatly, influenced more by local factors than by the federal government. To find out what affects the regional governments'propensity to subsidize, the authors examined available data for 1992-95, asking: How great is the variation across regions in the incidence of subsidies, and what are recent trends in such variation? What are the relative influences of supply and demand factors in shaping the current levels of subsidy? How do federal budget transfers affect regionally funded subsidies to local enterprises? To what extent are federal transfers distortionary, encouraging subsidies and postphoning the liberalization of local markets? Their findings: 1) Regional wealth and federal budget transfers to regional governments are two of the most important determinants of regional propensity to subsidize. 2) Even when regional budgetary wealth is controlled for, depressed regions (those affected most by industrial decline and unemployment) tend to spend less on subsidies than regions with more favorable economies. 3) Federal budget transfers are quite distortionary, that is, they encourage regional governments to continue subsidy policies and postpone structural reforms. In fact, federal transfers tend to be concerned in regions with the most distortionary policies. 4) Housing receives the lion's share of total regional subsidies, and there are greater disparities in housing subsidies than in agricultural subsidies. 5) Housing and transportation subsidies are strongly counter-equalizing: Households in wealthier regions receive more in housing subsidies and rural populations have less access to those subsidies, so up to 30 percent of regional subsidies are questionable in terms of equity. 6) Federal transfers have less effect on regional subsidies in agriculture, which are influenced more by the region's own tax base and its share of rural population or by such factors as the political influence of local interest groups. 7) To accelerate structural reforms, the federal government might consider reducing the number of recipients of federal budget transfers and changing the rules of allocation of the transfers, in particular by introducing conditional transfers linked to increases in cost recovery.Economic Theory&Research,Banks&Banking Reform,Municipal Financial Management,Public Sector Economics&Finance,Environmental Economics&Policies,Banks&Banking Reform,Municipal Financial Management,Public Sector Economics&Finance,Environmental Economics&Policies,Economic Theory&Research

Quasi-fiscal activities, hidden government subsidies, and fiscal adjustment in Armenia

This paper aims to develop a detailed analysis of quasi-fiscal deficits and subsidies, and their impact on Armenia’s fiscal performance in the second part of the 90-s. Based on the flow-of-funds approach, we estimate the magnitude of the quasi-fiscal deficits and the incidence of quasi-fiscal subsidies in Armenia, as well as identify main recipients and donors of quasi-fiscal financing. The main finding of the paper is that, while quasi-fiscal deficits in Armenia remain considerable, their recent decline has been the main source of fiscal adjustment in Armenia to date. The paper also shows that the population remains a major ultimate recipient of quasi-fiscal subsidies. Thus, the main distortive impact of quasi-fiscal subsidies is on social policy, not on enterprise restructuring and private sector performance.Armenia, subsidies, fiscal adjustment, quasi-fiscal deficit, losses in the energy sector

Armenia’s trade performance in 1995-2002 and the effect of closed borders: a cross-country perspective

The paper deals with two issues. First, it focuses on the analysis of Armenia’s trade performance based on the utilization of standard statistical models and develops comparative estimates of this performance relative to the peer countries. The comparison is undertaken in terms of trade openness, diversification, and composition. The main finding is that Armenia has been lagging in its export development relative to most CIS countries. The recent improvements in exports helped somewhat to reduce the gap. The second part of the paper provides for re-estimation of the “costs of blockade” effect. Armenia’s trade under-performance cannot be explained in terms of distorted government policies, because Armenia is recognized as a reform leader in the CIS.Armenia, trade, costs of blockade, gravity model, trade openness

Incentive Effects of Fiscal Equalization: Has Russian Style Improved?

The effects of inter-government fiscal arrangements on variation in regional economic growth are analyzed for Russia, a country with large cross-regional differences and considerable fiscal redistribution. Moreover, fiscal reforms implemented in the first half of 2000s, which followed to some extent scientific advice, make analysis of this case particularly interesting. We observe that post-reform fiscal redistribution became more rational and this resulted in fewer incentive distortions. We found no negative association between federal transfers and regional growth. Furthermore, there are no major differences between donor and recipient regions in the way how inter-governmental fiscal arrangements influence regional growth. Overall, fiscal policy variables have become less important growth determinants than it was the case in the 1990s. Still further reforms in federalism arrangements would be desirable.Fiscal equalization, inter-governmental finance reform, Russian regions, extreme bounds analysis