Public expenditure for agricultural sector in Russia: Does it promote growth?

Abstract

This paper presents the findings of the agriculture public expenditure review (PER) for the Russian Federation. It reviews the policy instruments and historical trends in the volumes and composition of budget support and investigates their role in recent agricultural growth. The paper also analyzes the effect of public spending in 2006-2017 on growth in agriculture using the fixed effects model and find positive effect. Support for general services is the most efficient method of agricultural spending, but in the Russian agricultural budget the subsidies to individual producers prevail. While the prevalence of the subsidies in the budget benefits the largest and most successful producers, this was part of the strategy to create strong value chains in order to compete with imports. However, the efficiency of investment support is decreasing. The paper explores the distribution of support between national and sub-national levels of budgeting system, and finds that the regionalization of support leads to market disintegration and efficiency losses.