Revenues, grants, and fiscal incentives - evaluation and the causes of decentralization effects in the budgetary system of Russia

The concept of the flypaper effect is used in analyzing fiscal incentives of the budgets of subjects of the Russian Federation receiving non-earmarked federal-grants. The calculations for 2005-2015 revealed an absence of the flypaper effect in general. A federal grant produces downward pressure even on aggregate spending of a recipient budget, reflecting negative fiscal stimulus and loss of well-being, and demonstrating the negative effect of intergovern_mental relations in the current arrangement of the budgetary system of Russia. Depending on the evaluation parameters, the flypaper effect was identified in the budgets of the subjects of the South and North-Caucasian federal districts and was absent in North-West, Ural and Far East districts. Vertical imbalance and the use of discretionary balancing grants are ruled out as factors of the flypaper effect. At the same time, the effect of inelasticity of budget expenditures and indirect taxation are confirmed to generate the flypaper effect.