Distribution of Responsibilities

1
Distribution of Responsibilities
in a Federal State
(case of Russia)
Makarov Valery (CEMI, NES, Moscow)
2
Distribution of responsibilities is a multi-task
problem
1
Theory
Sanjit Dhami (2005) Optimal Distribution of
Powers In A Federation A Simple, Unified
Framework., University of Leicester, UK. Working
Paper No. 05/24, July 2005.
Two levels, four tasks regional insurance,
coarseness of federal information,
internalisation of spillovers and raiding of
commons.
The paper examines six regimes of distribution of
powers autarky, centralization, unregulated
devolution, regulated devolution, direct
democracy, and revenue maximising leviathan.
3
Distribution of responsibilities is a multi-task
problem
2
Practice

• Geistlinger M. Federalism and Distribution of
  Powers. The distribution of competences in the
  field of education University of Salzburg,
  Department of Public Law.
• Survey across Federalist countries, including
  Russia.
• Ministry of Local Government and Regional
  Development (Norway). The Governments
  recommendations
• Responsibilities should be placed at the lowest
  effective level.
• The county authority should not be developed
  into a superordinate authority.
• Changes in the distribution of responsibilities
  should help to reduce bureaucracy.
• The central government should have the
  responsibility for standardized and rule
  oriented responsibilities and for supervisory
  responsibilities.

4
Planned Experimentsof the Ministry
Testing the alternative models

• Organization of the County Governor and the
  county authority in a single administrative body
  the single administration county authority
• Differentiation of municipal responsibilities,
  which means that certain municipalities are
  assigned one or more county or state
  responsibilities.

5
Hierarchical structure

distribution of responsibilities
6
Rural municipalities
Expenditures of budgets of rural municipalities
(mln. roubles)
Population
(thousand person)
7
Russia regions
Expenditures of budgets of regions
(bln. roubles)
Population
(millions person)
8
Moscow districts
Expenditures of budgets of Moscow districts
(mln. roubles)
Population
(thousand person)
9
Rural municipalities
2,0305
Russia regions
Value of power
0,6265
Moscow districts
0,2772
10
A Federal State emerges by variety of reasons.
Some of the reasons come from a general problem
of control in complex multidimensional systems.
See, for example Qian Yingyi (1994)
Incentives and Loss of Control in an Optimal
Hierarchy. Review of Economic Studies,
61(3)527-544.
11
The paper considers an commercial organization
that owns a capital stock an uses a hierarchy to
control the production. The optimal problem is
to find number of tiers in the hierarchy and
optimal quantity of workers is in each tier.
The objective function is a revenue generated
from production activity. The trade off is
between the two parameters the number of
bureaucrats to control workers and efficiency of
working activity under the control.
12
There is sizable literature devoted to optimal
design of technical devices, like memory for
computers and others. See, for example Jacob
B. L., Chen P. M., Silverman S. R. and Mudge T.
N. (1996) An Analytical Model for Designing
Memory Hierarchies. IEEE Transactions of
Computers, vol. 45, 10, October 1996.
Historically a Federal State appeared in a
process of unification of relatively small states
to be more powerful (militarily, politically
economically) together. For example, there are
Germany, Canada, USA. The opposite top down
process takes place too. It based on keeping
multinational state sustainable.
13
A fundamental problem for the necessity of
federal states structure arises in relation with
efficiency of provision of local and national
public goods.
See Besley T. and Coate Stephen (2003)
Centralized versus decentralized provision of
local public goods a political economy approach
Journal of Public Economics, 87 2611-2637.
14
In the presentation I formulate and solve
relatively simple optimization problem where the
only factor for Federal States existence
matters. Namely, it is size of population.
Notations N - total number of citizens in a
country ? - costs of a government to provide
one unit of a public good (actually public
service) per a person q - number of a
hierarchical level (a tier) for a given
government q 0,1, 2, kq - costs for
keeping functioning of the government on
hierarchical level q, under condition that the
level is lowest nq - quantity of governments
under subordination of the levels q government
fq - total costs for provision of a public
service (quantity is equal to one) for the whole
population plus costs to keep all governments
functioning
15
Objective function total costs (under
conditions (1) all citizens are equal to each
other, (2) everybody receives a unit of the
public service.) cn2 - costs for provision of
a unit of public good (service) for n
people kqln(nq) - costs to keep government
of the level q functioning, under condition that
the government controls nq governments of lower
level
16
(No Transcript)
17
(No Transcript)
18
Optimal number of governments levels (tiers)
The problem consists of finding the q, which
provides minimal total costs for provision of
public good in quantity 1. In other words q
arg Min(fq) Here Min is taken over q. But it is
clear that functions fq depend on the other
parameters participating in the definition of the
function, that is on N , ? , kq , nq . Hence the
number q depends on the named parameters.
19
Optimal quantity of inhabitances in a country
What is more effective from the point of view of
total costs to provide public goods? To be in
large Federal State or to create smaller state
(probably federal one too). Much depends on
relation between the numbers kq. The population
has to compare the total costs (and hence amount
of taxes) under staying in the initial Federation
or secession in a certain stake. Namely, one
has to compare Min(fq)/n, where n runs from
1 to N. The N can be equal to infinity. Min is
taken over n and q. Here Min(fq)/n is a head tax
in the case of the size of population is equal to
n. The country has federal structure if qgt0.
20
Optimal size of a country with a fixed number of
ties
Let us suppose that q is given. Then optimal
size of population n(q) is going to be
dependent on the given q.
The problem makes sense in some practical issues
as we see below.
21
Numerical
calculations
22
Optimal number of governments levels (tiers)
one level
two levels
three levels
four levels
Total number of citizens in a country
five levels
23
Optimal quantity of inhabitances in a country
0,11
1
2
3
4
5
0,060
0,024
0,015
0,015
0,012
Head tax
0,010
0,0099
0,0085
Total number of citizens in a country
100
316
104
105
107
108
109
1010
106
24
Number of inhabitances in a municipality
1
2
3
4
5
158
100
104
72
66
60
52
47
41
Total number of citizens in a country
100
316
104
105
107
108
109
1010
106
25
1
World government is efficient if federal
structure
2
Greater population local government closer to
people
26
How many mayors?
27
How Chinese Jurisdictions are defined
Local level More three tiers 4. Counties
2109 5. Townships
44800 6. Villages 737400
Federal level Three tiers 1. Central government
1 2. Provincial regions
31 3. Prefectures 331
1500
McGuckin R. and Dougherty S. (2003)
Restructuring Chinese Enterprises The Effect of
Federalism and Privatization Initiatives on
Business Performance. The Conference Board
Research Report R-1311-02-RR.
28
Russian Federation
Formally according to the Constitution of
Russian Federation there are three
levels Federal government
1 Subjects of Federation
89 Municipalities 11429
In fact Russia has or will have soon five (six)
levels Federal government
1 Federal districts
7 Subjects of Federation 89
(87) Municipal districts Townships Villages
Russia
The reform of the local governance considers
creating 24000-30000 townships and villages in
total. The townships and villages are at the same
level but with a little bit different status.
29
Russia
30
USA

• Quantity of local governments in USA is greater
  then 82000 (Year 1985). See. Rosen, Harvey, S.
  (1988)
• 3130 counties ?? ??? 17 ?????? ?? ????? ?????????
  ????????????, 5 ???????? ????? ????? 200
  ????????? ????????????, Cook County ? ?????
  ???????? ????? 513 ????????? ??????????.
• ??? ?????????? ???????????? ??????????
  ?????????????? (??????, ??????? ? ?????,
  ?????????, ??????? ??????? ????????????
  ??????????), ???????? ?????? ? ??????????? ??????
  (????-??????? ??????????).
• ? ??????? ? 1962 ?? 1972 ???? ????? ??????????
  ??????????? ??????????? ? 91186 ?? 78218 ?? ????
  ?????????? ????? ???????? ???????, ????? ???????
  ??????????? ?? 54,5. ??? ???? ????? ????????,
  ??????? ? ????????? ????????? ???????? ????????
  ?? ??? ?? ??????, ? ????? ??????????? ???????,
  ????????, ??????? ?? 30,4. ????? 1972 ????
  ??????? ?????????? ? ????? ?????????? ? ?????
  ????????? ??????????.
• ???????? ?????, ??????? ?????? ?????, ??????? ?
  ?????????. ??????? ???????????? (??????
  ??????????) ???????? ? greater competition and
  redundancy. ??????????????, ??????? ????????????
  ???????? ? ??????? ????????????? ? ???????
  ??????????? ?????? (????). ?? ???? ?????
  ???????? ?? ??????????? ????? ??????????.
• ??????? ????????, ??? ????? ?????? ?? ??????? ?
  ????????? ??????????? ??????????.

31
Literature

• Alesina Alberto and Spolaore Enrico (1997), On
  the Number and Size of Nations, The Quarterly
  Journal of Economics, CXII, 4, November 1997,
  pp1027-1056.
• McGuckin R. and Dougherty S. (2003)
  Restructuring Chinese Enterprises The Effect of
  Federalism and Privatization Initiatives on
  Business Performance. The Conference Board
  Research Report R-1 311-02-RR

32
Literature (cont...)

• Besley T. and Coate Stephen (2003) Centralized
  versus decentralized provision of local public
  goods a political economy approach Journal of
  Public Economics, 87 2611-2637
• Bewley Truman F. (1981) A Critique of Tiebouts
  Theory of Local Public Expenditures.
  Econometrica, vol. 49, 3, May, 1981.
• McGuckin R. and Dougherty S. (2003)
  Restructuring Chinese Enterprises The Effect of
  Federalism and Privatization Initiatives on
  Business Performance. The Conference Board
  Research Report R-1311-02-RR.

33
Literature (cont...)

• Samuelson, P. A. (1954) The Pure Theory of Public
  Expenditure. Review of Economics and Statistics,
  37, 4.
• ????????????? ?????? ?1 (2004).
• ????????? ?. ?. (2004) ????????????? ???????????
  ??????????? ?????????? ??????. ?????? ?????????
  ?????? ??? ??????????? ??????, ?1. ???. 87-99.
• ??????? ?. ?. (2004) ?????????? ??????????
  ?????????? ?????? ??????????? ??????? ?.
  ??????????, ?1.
• ???????? ?. ???????? ?. (2004) ???????????? ???
  ????? ???????????????? ??????????.
• ?. ??????????, ?1.
• Boerzel T. A. and Hosti M. O. (2002) Brussels
  between Bern and Berlin Comparative Federalism
  meets the European Union. Constitutionalism
  Web-Papers, Con WEB No. 2/2002.
  http//les1.man.ac.uk/conweb/
• ? ?????? Boerzel T. A. and Hosti M. O. (2002)
  ?????????? ??? ?????????? ? ?????? ????, ???
  ??????????? ???? ???? ? ??????? ?????????????
  ?????????? ??????????????? (? ?? ?????????????)
  ????.

34
Literature (cont...)

• Qian Yingyi (1994) Incentives and Loss of
  Control in an Optimal Hierarchy. Review of
  Economic Studies, 61(3)527-544.
• Winter Eyal Scapegoats and Optimal Allocation of
  Responsibility Hebrew University of Jerusalem,
  The Economic Department and the Center for
  Rationality.
• Jacob B. L., Chen P. M., Silverman S. R. and
  Mudge T. N. (1996) An Analytical Model for
  Designing Memory Hierarchies IEEE Transactions
  of Computers, vol. 45 NO 10 October 1996.
• Rosen, Harvey, S. (1988) Introduction to Fiscal
  Federalism Quantitative Studies Edited by
  Harvey S. Rosen. Pp. 1 4. The University of
  Chicago Press.
• Zax, Jeffrey S. (1988) The Effects of
  Jurisdiction Types and Numbers on Local Public
  Finance. In Fiscal Federalism Quantitative
  Studies Edited by Harvey S. Rosen. Pp. 79 106.
  The University of Chicago Press.
• ??????????? ????????? ?????????? ????????? ??
  ???????, ???????? ?????????? ???? ? ??????? ?? 1
  ?????? 2004?. (2004). ??????????? ??????
  ??????????????? ??????????, ?????? 2004?.