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Distribution of Responsibilities

Distribution of Responsibilities. in a Federal State. (case of Russia). Makarov Valery (CEMI, NES, Moscow). 1. Distribution of responsibilities is a multi-task problem. Theory.

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Distribution of Responsibilities

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  1. Distribution of Responsibilities in a Federal State (case of Russia) Makarov Valery (CEMI, NES, Moscow)

  2. 1 Distribution of responsibilities is a multi-task problem 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. 2 Distribution of responsibilities is a multi-task problem 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 Government’s 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 andthe county authority in a singleadministrative 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 state’s 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 State’s existence matters. Namely, it is size of population. Notations: N - total number of citizens in a country; с - 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 level’s 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. Then if q = 0, one has total costs to provide one unit of public good and costs to keep the government functioning as f0= k0+ c*N2. Here the first term is costs of government’s functioning (central one) and the second one is costs to provide public good for the whole population. Objective function – total costs (under conditions: (1) all citizens are equal to each other, (2) everybody receives a unit of the public service.) c*n2 - costs for provision of a unit of public good (service) for n people; kq*ln(nq)- costs to keep government of the level q functioning, under condition that the government controls nq governments of lower level

  16. If q >= 1 to calculate total costs is a little bit more difficult. It is easy to do under assumption that all governments of a given level control the same number of governments. The number nq indicate exactly that condition. The number does not depend on particular copy of the level’s q government. Namely, f1= k0*ln(n0) + n0*(k1 + c*(N/n0)2) = k0*ln(n0) + n0*k1 + c*N2 / n0

  17. Under q = 2 total costs are: f2 = k0*ln(n0) + n0*k1*ln(n1) + n0*n1*k2 + c*N2 / n0*n1 Going along the induction one obtains the total costs for arbitrary number of levels q: fq = k0*ln(n0) + n0* k1*ln(n1) + n0*n1* k2*ln(n2) +…+ n0*n1*…*nq-2*kq-1*ln(nq-1) + n0*n1*…*nq-1*kq + c*N2 / n0*n1*…*nq-1

  18. Optimal number of government’s 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, с, 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 nand 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 q*>0.

  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 government’s 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 Head tax 0,012 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 Federal level Three tiers: 1. Central government 1 2. Provincial regions 31 3. Prefectures 331 Local level More three tiers: 4. Counties 2109 5. Townships 44800 6. Villages 737400 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 Из них 17 вообще не имеют локальных правительств, 5 княжеств имеют более 200 локальных правительств, Cook County в штате Иллинойс имеет 513 локальных юрисдикций. • Под локальными юрисдикциями понимаются муниципалитеты (города, большие и малые, поселения, главный признак многоцелевое назначение), школьные округа и специальные округа (одно-целевое назначение). • В периоде с 1962 по 1972 годы число юрисдикций значительно уменьшилось с 91186 до 78218 за счет сокращения числа школьных округов, число которых сократилось на 54,5%. При этом число княжеств, городов и городских поселений осталось примерно на том же уровне, а число специальных округов, наоборот, выросло на 30,4%. После 1972 года процесс замедлился и число юрисдикций в целом понемногу возрастало. • Основной вывод, который делает автор, состоит в следующем. Большая фрагментация (больше юрисдикций) приводит к greater competitionandredundancy. Соответственно, меньшая фрагментация приводит к большей эффективности и большей монопольной власти (силе). То – есть можно говорить об оптимальном числе юрисдикций. • Следует отметить, что автор ничего не говорит о механизме образования юрисдикций.

  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 Tiebout’s 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. • Муниципальная власть №1 (2004). • Иноземцев В. Л. (2004) «Специфические особенности европейской социальной модели». Журнал Института Европы РАН Современная Европа, №1. Стр. 87-99. • Казаков А. И. (2004) Российский этнический федерализм: угроза целостности страны? ж. Федерализм, №1. • Евсеенко Т. Солопова Н. (2004) Конфедерация как форма государственного устройства. • ж. Федерализм, №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/ • В работе Boerzel T. A. and Hosti M. O. (2002) приводится ряд аргументов в пользу того, что Европейский Союз идет в сторону Федеративного устройства согласительного (а не конкурентного) типа.

  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. • Численность населения Российской Федерации по городам, поселкам городского типа и районам на 1 января 2004г.» (2004). Федеральная служба государственной статистики, Москва 2004г.

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