Lev Freinkman

Fiscal Decentralization and the Quality of Public Services in Russian Regions

The paper provides empirical analysis of the relationship between fiscal decentralisation and the quality of public services in the Russian regions. The analysis suggests that fiscal decentralisation has no significant effect on the key inputs into secondary education, such as schools, computers, or availability of pre-schooling, but has a significant positive effect on average examination results, controlling for key observable inputs and regional government spending on education. Decentralisation also has a positive impact on the quality of municipal utilities provision. Both effects can be attributed to strengthened fiscal incentives rather than to superior productive efficiency of municipal governments.

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 sectors

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.

Diaspora's contribution to Armenia's economic development : what drives the first movers and how their efforts could be scaled up?

The large Armenian Diaspora, widely dispersed throughout the 5 continents, had successfully preserved the nations independence aspirations across generations born far from the homeland. This nationalistic tradition along with a strong sense of Pan-Armenian solidarity helped to mobilize an unprecedented amount of Diaspora support to the newly constituted state. Over more than a decade, the Armenian Diaspora excelled in generating international political support for Armenia, in the development, funding, and implementation of humanitarian aid programs, as well as in mobilizing private transfers to the Armenian population. There has been a broad consensus that the Diaspora is an invaluable and fundamental resource for the economic, social and political development of Armenia. At the same time, it is accepted that there is a considerable gap between the massive humanitarian contribution of the Diaspora and its much more modest participation in Armenias economic life (Freinkman 2001, Samuelian et al. 2003, Manasaryan 2004). In short, the Diasporas contribution to Armenias long-term development agenda is considered to be much below its potential. This includes the low level of Diaspora investments and business participation, as well as the limited role of the Diasporas organizations in the ongoing debate on Armenian development policies.

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.

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.

Institutional frameworks to support regulatory reform in middle-income economies : Lessons from Russia s recent experience

This article addresses sustainable institutional arrangements to support economy-wide improvements in the investment climate in the context of a middle-income economy. The recent experience of the Agency for Strategic Initiatives (ASI) in Russia provides a valuable example of establishing a new government agency to advance economic deregulation in an environment where the political appetite for reform is limited. In our view, ASI has been the most successful institutional innovation to emerge in Russia since the 2008–09 financial crisis. Rather than engage in the traditional tussle over budget funds and benefits, ASIs mandate has been to organise a strategic dialogue with the private sector and build consensus within the government. We consider ASIs institutional set-up in light of the good practice principles adopted under Russias ‘new industrial policy’. Our findings suggest other middle-income economies may find ASIs experience applicable when designing institutions to support a deregulation reform agenda. While the crisis in Ukraine has triggered a fundamental shift in Russias development path that is likely to make ASIs deregulation efforts largely irrelevant, the agencys practical experience remains pertinent to the broader discussion of institutional arrangements to promote deregulation.

Stocktaking the Reforms in Public Financial Management

The paper documents how Nigeria’s public financial system stacks up against international standards, the better to see current institutions and their capacities in a wider perspective. It uses Public Expenditure and Financial Accountability (PEFA) framework for analysing the Nigerias systems and processes. The purpose is not to demonstrate that Nigeria falls short of international best practice, but rather to show where progress has been made and where much still remains to be done, both in the improvement of formal rules and processes, but also in the capacity to follow them. The latter is at the heart of the challenge. For, while the design of Nigeria’s PFM system clearly needs modernizing, even to operate it as once intended would be an immediate improvement.

Determinants of Russian Retail Petroleum Prices

We study the relationship between petroleum products consumer prices and the cost of their production (such as price of oil) in the Russian market. The hypothesis of the presence of asymmetry in the reaction of oil product prices in response to changes in world oil prices is tested. Point of equilibrium of supply and demand at the regional level is modelled. We also study the effect of spatial factors that reflect the peculiarities of the Russian market (the presence of vertically integrated companies and their interactions) on behavior of the petroleum products prices, as well as the effects of antitrust investigations. It is shown that supply factors of alternative sources (mini-refineries, imports, deliveries through pipelines, etc.) have a significant, albeit lesser effect on the Russian petroleum products retail prices along with the characteristics of VICs (vertically integrated company) supply and costs. No clear evidence of the asymmetry of the reaction of oil product prices in response to changes in world oil prices was found. The reason appear to be related to the spatial inhomogeneity of the Russian petroleum products market.

Diasporas as Partners for Development: Indirect (Pragmatic) vs. Direct (Administrative) Approaches to Diaspora Engagement

The chapter aims to develop an indirect or pragmatic approach to facilitate this virtuous cycle of diaspora-home country interactions. This approach favors “high-resolution” diaspora policies — ones that cultivate the project-specific relationships and commitments of movers and shakers (both in the diaspora and in homeland institutions) that might make a significant difference and are counted in tens and hundreds, not thousands or tens of thousands. This novel indirect approach is contrasts conventional direct, or administrative, approaches. The indirect approach is currently in its infancy, which is why we had to rely on our personal policy experience perhaps more than is usual in the context of academic literature.