, Dr., Professor, Head of Department of Finance, Banking and Insurance, Sumy State University, Ukraine
, Ph.D., Manager Data Systems and Fiscal Analysis, Revenue Estimating Division, Texas Comptroller of Public Accounts, USA
, Ph.D. Student, Department of Finance, Banking and Insurance, Institute for Business Technologies “Ukrainian Academy of Banking”, Sumy State University, Ukraine
A successful reform of financial decentralization in Ukraine requires compliance with a number of institutional conditions that will allow them to achieve their goals efficiently and without resource losses. The purpose of reforming the existing system of local self-government is to increase the degree of citizens needs satisfaction. The reform of financial decentralization is intended to transfer the relevant financial resources to the level of territorial communities in order to satisfy the interests of the community. But for this purpose, it is necessary to create a number of institutional conditions that will organize relations between all stakeholders.
An analysis of literary sources confirmed the hypothesis that the relationship between the state and society is determined by a set of institutional conditions that collectively determine the functioning of the economic system. The literary review pointed to the need for a comprehensive perception of institutional conditions as an environment, taking into account territorial bases, legal aspects, financial and economic relations, interpersonal interaction. It was found that institutionalization is the basis for any social changes in society, in particular for a large-scale reform of local self-government – financial decentralization.
The methodical tools were methods of index analysis, which allowed to carry out an equal comparison of heterogeneous institutions according to the institutional conditions of the research objects. The period of observation of the key indicators of public administration was the decade from 2006 to 2016. The aggregate index of institutional conditions for financial decentralization was created in 2012-2016. The subjects of the study were selected European countries with experience in implementing the reform of financial decentralization. Particular attention is paid to the analysis of the corruption component of the institutional environment, since it poses a threat to reform. Some aspects of economic freedom, in particular, the tax burden index, which characterizes the degree of fiscal pressure in the country and the index of state expenditures, are investigated.
The next stage was the construction of an index of institutional conditions of financial decentralization. At the first stage, a baseline of institutional conditions was formed, which included the following: voice and accountability; political stability and lack of violence; the effectiveness of public administration; quality of state regulation; compliance with legislation; control of corruption; tax burden; characteristic of the volume of public expenditures. At the second stage, the absolute normalization of the selected indicators for the period of 2012-2016 years was carried out. The final stage involves an additive convolution of normalized indicators and obtaining an effective indicator. As a result of the study, it was clarified that a number of institutional environment issues should be addressed in order to carry out an effective reform of financial decentralization. Ukraine should concentrate on solving the problems of political stability, improving the efficiency of public administration, preventing and combating corruption, adhering to legislative norms, and so on. The obtained results of the research should become the benchmark for successful financial decentralization. It is necessary to rely on the experience of more successful European partners, the advantages of which were noted in the process of comparative analysis.
Keywords: efficiency of government institutions, index of institutional conditions of financial decentralization, indices of public administration, institutional conditions, institutionalization, integral indicator, corruption, financial decentralization.
JEL Classification: H70, H60, H40, H20, C43.
Cite as: Shkolnyk, I.T. Melnyk, B. Mershchii. (2018). Assessment of institutional conditions of fiscal decentralization in Ukraine. Financial Markets, Institutions and Risks, 2(3), 5-13. DOI: 10.21272/fmir.2(3).5-13.2018.
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