Determinants of public spending composition in the Russian regions

Abstract

We build factor models of the regional budgets spending composition, based on data for 2011—2019. Our estimates reveal that expenditure on social security, public health, and education have relatively low elasticity by fiscal revenue (0.6—0.7), On the contrary, national economy and housing expenditure have the highest elasticity (1.3—1.7), while culture and general public services expenditure are characterized with medium elasticity (0.8—0.9). The major econometric tool used for the analysis is quantile regression that allows to detect heterogeneity of expenditure relations with various factors. The dependence of fiscal revenues is homogenous only for social security, public health, and housing, while for other types of expenditure this relationship differs between regions with high and low fiscal revenue. We suggest procedure to identify individual ‘spending preferences’ of particular regions and classify all regions depending on their top spending priorities. Regions with a larger value of the gross regional product most often have education and social security as their priority while other regions mainly have national economy spending as a priority.