Evolution of the Federal Center-Northern regions financial relationship and its consequences for “organized“ migration out of the North

Publication date
Sunday, 20.05.2001

A. Zolotareva, O. Izryadnova, P. Kadotchnikov, Ye. Kitova, A. Radygin, S. Sinelnikov, I. Trounin, T. Chizhelikova, S. Shatalov, A. Yudin, John Rayner, Shauna McLarnon


With the ongoing cardinal transformations in Russia’s national economy, the northern territories have experienced intensification of the problems of development and functioning of their social and economic complexes. That has urged researchers to undertake a study of general trends and specifics of structural changes in regional economies and the mechanism of interaction between the federal and territorial tiers of the public governance.


Introduction 3
Part 1. Prerequisites of the analysis of the Federal Center – Northern Regions financial relationship
1.1. The problem of the typology of the Northern regions  6
   1.1.1. General Typology Problems in regard to the Northern Regions 8
   1.1.2. Criteria of singling out districts situated in the Extreme North and territories with equal status 11
   1.1.3. An outline of the evolution of the normative and legal basis and the legal interpretation of the North 17

1.2. Social and economic development of the Northern regions by year 2000: a brief outline 20
   1.2.1. Mineral, raw material and natural resources of the Russian North 20
   1.2.2. General characteristics of the economy of the Russian North 22
   1.2.3. Distribution and structure of production in the Russian Northern regions 28
   1.2.4. Demographics and employment 33

Part 2. Financial flows from the federal budget to the northern regions 45
2.1 General overview of relations between the federal budget and the Northern regions’ budgets. 45
   2.1.1 Non-targeted federal financial support 45
   2.1.2 Targeted financial support 57
   2.1.3 The general evaluation of the federal financial support to the Northern regions 58

2.2. Improving the system of state support of the Northern Supply 62 Part 3. Northern benefits and compensations: an analysis of the financial consequences of the abolition of their compulsory nature. Recommendations on the economic policy and legislation 68
3.1. Payments, benefits, and compensations stipulated by the legislation for districts of the Extreme North and territories with equal status 69
  3.1.1. Taxation of employers’ expenditures for payments, benefits, and compensations to citizens working in Northern regions 69
  3.1.2. Taxation of Northern payments, benefits, and compensations, stipulated by the legislation, being the components of citizens’ incomes 75

3.2. Recommendations on the reform of the system of social guarantees and compensations for persons employed by the private sector of the North's economy 77
3.3. An analysis of the financial consequences of the abolition of the compulsory nature of benefits and compensations 82
  3.3.1. Description of calculation versions and initial information 82
  3.3.2. Methods applied to calculate the financial consequences of the abolition of the compulsory nature of benefits and compensations 84
  3.3.3. Calculation for citizens given a job in the territory of a Northern region 85
  3.3.4. Calculation for citizens working in the territory of a Northern region 95

Part 4. Evaluation of possible outcome and calculation of budget effect of migration from the northern regions 105 Part 5. Fiscal relations between the federal and territorial governments in Canada: a comprehensive overview
5.1. Overvitw 125
5.2. Federal fiscal transfers to provinces and territories 127
  5.2.1. The Canada Health and Social Transfer (CHST) 127
  5.2.2. Provincial Equalization Transfers 132
  5.2.3. Territorial Formula Financing (TFF) 136
5.3. Development and implemention of the TFF 144
  5.3.1. The Period 1985-1990 145
  5.3.2. The Period 1990-1999 147
  5.3.3. The Fiscal Freeze and Five Percent Cut to Federal Transfers 151
  5.3.4. The Current Territorial Financing Formula Arrangement 152

5.4. The effect of federal transfers on the territories 155
  5.4.1. The Effect on the Yukon 155
  5.4.2. The Effect on the Northwest Territories 156
  5.4.3. The Fiscal Impact of the Division of the NWT and Creation of Nunavut 157

5.5. Conditional federal transfer programs 157
5.6. Ensuring greater accountability for transfer funds 159
  5.6.1. Enhancing Fiscal Capacities 159
  5.6.2. Increasing Territorial Self-Sufficiency 161
  5.6.3. Representing Territorial Interests to Federal Authorities 163

5.7. Lessons learned 163
5.8. Conclusion 168
Conclusions 169
Annexes 177
Annexes to Section 1 177
Annex 1.1. (references) 177
Annex 1.2 (legislative acts) 179
Annexes to Section 2. Legal fundamentals for the Northern Supply (over the reform period) 181
Annex 2.1. Legislative procedures for the financial and organizational mechanism of the Northern Supply. 182
Annex 2.2. Main legislative acts regulating the Northern Supply between 1995 trough 1996 184
Annex 2.3. Regulation of relations between the federal authorities and the Subject in terms of organization of the Northern Supply. 188
Annex 2.4. The Northern Sea Route 189
Annex 2.5. Regulation of the northern transportation tariffs 191
Annex 2.6. The legislative regulation of the Northern Supply between 1997 to 1998 194
Annex 2.7. Design of bills on the Northern Supply 195
Annex 2.8. Regulation of the Northern Supply between 1999 through 2001 197
Annex 2.9 Responsibility of the executive authorities, enterprises and organizations in the course of carrying out the measures on the Northern Supply. 200
Annex to Section 3 202
Annex to Section 4. Results of calculations of the annual saving and profitability term for some variants of migration 203


Evolution of the Federal Center-Northern regions financial relationship and its consequences for “organized“ migration out of the North
Moscow 2001

ISBN 5-93255-042-2

The research and the publication were undertaken in the framework of CEPRA (Consortium for Economic Policy, Research and Advice) project funded by the Canadian Agency for International Development (CIDA).

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