Analyzing distribution effects of the federal budget transfers for the Far East

The article analyzes the economic consequences of federal redistributive transfers for the regions of the Far East on the basis of two-regional computable general equilibrium model. The model is based on the assumption that regional government aims at maximizing their total spending which is limited by the size of the region’s tax base. Migration, trade and federal transfers are the main sources of regional interconnection in the national economy. The authors calibrated the linearized version of the model on data of nine regions of the Far Eastern Federal District. The regions have significant structural and macroeconomic differences not only in such aggregates as average per capita consumption and wages, but also in terms of average per capita income and budget expenditures. The researchers have found that federal transfers have a negligible effect on the welfare of the regional households. However, they affect other variables, such as consumption, employment, price level, wages, regional taxes and government spending. An initial increase in the welfare level causes an in-migration of labor resources, and a new equilibrium is established at a lower price level and per capita income in the recipient region. Moreover, a decrease in prices for local products is observed for the South Zone of the Far Eastern Federal District (Primorsky and Khabarovsk Krais, the Amur Oblast), while for all other regions there is an opposite effect. The research has shown that the regions of the Far East are characterized by different reactions and may have opposite effects with respect to the state budgetary policy measures in relation to these regions.