Fiscal Capacity of the Regions and Their SMEs Development: Evidence from Russia

The purpose of this study was to examine the dependencies between fiscal capacity of 83 regions of the Russian Federation within the period from 2010 to 2015 and development of small and medium-sized businesses in them. For this purpose, the authors formulated two hypotheses: (1) there is a correlation between the level of budgetary expenditures in regions of Russia and indicators of SMEs output in these regions. And that (2) with the increase of the budget expenditures of the region, should increase the economic output of SMEs in the region. To check hypotheses formulated we developed an economic-mathematical models that represent a regression function. The hypothesis (1) was confirmed. This relationship turned out to be negative. The values of the coefficients at x for year 2015 were positive (3.22 - for small enterprises; 0.68 - for medium enterprises; 1.67 - for individual entrepreneurs), hence, with increasing values of budget expenditures in a particular region the magnitude of SMEs output were also increasing. The increase in economic output of SMEs, located in the region, as well as individual entrepreneurs sales increase, takes place faster, than the growth of budget expenditures, which confirms the hypothesis (2) and is consistent with the findings obtained by other scientists in their researches.