Fiscal Decentralization and Economic Growth: Assessing Public Policy in Ukraine

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.