| Summary: | The paper argues that governments in regions that rely heavily on intergovernmental transfers and natural resource rents face serious distortions in their incentive structure. As a result, such regions tend to have more fiscally centralized governments than the regional characteristics would suggest. Data on Russian regions in the late 1990s-early 2000s support this hypothesis. Advancing intraregional fiscal decentralization in rentier regions could reduce policy distortions, and make the subnational environment more supportive of economic development.
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