The First- and Second-Nature Geographic Correlates of Federal Budget Transfers and Fiscal Dependence—Evidence from Russia and the United States

Abstract

This study examines fiscal federalism by interrogating the relationship between first- and second-nature geographic features—most notably distance as well as various economic/infrastructural indicators—and intergovernmental transfers and subnational fiscal dependence in Russia and the United States from 2003 to 2015. Our findings reveal stark differences in the role that geographic factors play in these two federations. While first- and second-nature factors influenced both transfers and reliance in Russia, only second-nature indicators had an effect in the U.S. case. Economic development and infrastructural improvements do not cause the influence of first-nature indicators to evaporate altogether, but they do attenuate the effects of those considerations.