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Fiscal Decentralization and Economic Growth: Assessing Public Policy in Ukraine

Kovalchuk Anna

,

Zhang Donghui

Kovalchuk Anna 1

Zhang Donghui 2

  1. Ph.D. Student, School of Economics, Shandong University, PR China. 1

  2. Ph.D. of Economics, Professor Shandong University, PR China. 2

Pages: 58-68

DOI: 10.18488/journal.74.2020.72.58.68

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Article History:

Received: 09 July, 2020
Revised: 12 August, 2020
Accepted: 14 September, 2020
Published: 28 September, 2020


Abstract:

The purpose of the study is to attempt to ascertain the primary influences affecting the regional economic growth in developing countries. The research took place on the data panel of 24 provinces in Ukraine over four years under a non-linear fixed effect framework. The paper shows that population growth fosters economic efficiency. Revenue decentralization is negatively related to per capita gross regional product (per cap GRP). By so, produces a relatively high, positive, but not-significant effect under non-linear specifications; on the contrary, per capita GRP growth declines as local revenue increases under fixed-effects. As such, the research proves that findings directly rely on the model selected; however, institutional conditions matter. The business environment reforms, surprisingly, detrimentally influence regional economic growth. The economic conditions in Ukraine are hard to specify as a direct result of fiscal decentralization (FD). Hence, various impacts of non-economic considerations can contribute to regional economic growth degrees, as well. Finally, the results are by no means as satisfactory as would be expected, and additional work is clearly desirable.
Contribution/ Originality
This study contributes to the existing literature on fiscal decentralization (FD) based on its relations with regional economic growth in developing countries. The paper contributes the first logical analysis on the data-set that covers the period from the launching FD up to now considering economic and social crisis. The paper's primary contribution is empirical confirmation revenue decentralization detrimentally impacts per capita GRP in Ukraine.

Keywords:

Fiscal decentralization, Countries in transition, Revenue, Non-linear regression, Fixed-effects, Local governments.

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Funding:

This study received no specific financial support.

Competing Interests:

The authors declare that they have no competing interests.

Acknowledgement:

Both authors contributed equally to the conception and design of the study.

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