Financial self-sufficiency of Ukrainian territorial communities and local economic development: Modeling the causal relationship

  • Received June 14, 2023;
    Accepted July 21, 2023;
    Published July 27, 2023
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/pmf.12(2).2023.02
  • Article Info
    Volume 12 2023, Issue #2, pp. 17-31
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    7 articles
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This work is licensed under a Creative Commons Attribution 4.0 International License

The financial self-sufficiency of communities determines their ability to create additional jobs, attract investment resources, offer quality social services, and improve the population’s living standards and well-being. The study aims to identify the casual relationships between financial self-sufficiency and local economic development of Ukrainian territorial communities during economic instability. The paper used integrated assessment based on a spatial approach (identifying the level of local economic development), indicative method (calculating empirical values of financial self-sufficiency of communities), VEC model (analyzing the sensitivity of local economic development to changes in financial self-sufficiency), balanced multi-component regression method (modeling the relationship between local economic development and financial self-sufficiency). Data were gathered on all territorial communities of Ukraine in 2021. The results show that the highest level of local economic development was observed in Dnipropetrovsk oblast (empirical coefficient equal to 0.855), high levels in Kharkiv, Zaporizhzhia, Odesa, Kyiv, and Poltava oblasts (0.787; 0.687; 0.684; 0.663 each, respectively), and moderate levels in Zakarpattia (0.448) and Kirovohrad (0.433) oblasts. With increased financial self-sufficiency, local economic development can exceed 2%; a 1% increase in the decentralization of tax revenues and expenditures simultaneously leads to an increase in the attractiveness of the investment climate as an indicator of local economic development (2.3-6.6%). The study proves that the territorial communities of the regions characterized by a low level of local economic development demonstrated higher values of decentralization of interbudgetary revenues than those with higher values of local economic development.

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    • Figure 1. Methodology for studying the relationship between financial self-sufficiency and local economic development
    • Figure 2. Local economic development in Ukraine, 2021
    • Table 1. Configuration of components and indicators for the assessment of local economic development
    • Table 2. Local economic development of territorial communities in Ukraine: Indicative and spatial approach, 2021
    • Table 3. Financial self-sufficiency of territorial communities of Ukraine: The context of decentralization, 2021
    • Table 4. Sensitivity of local economic development indicators to changes in financial self-sufficiency of territorial communities of Ukraine, 2021
    • Conceptualization
      Halyna Voznyak, Halyna Kaplenko, Olha Mulska
    • Data curation
      Halyna Voznyak, Vasyl Koval, Olha Mulska
    • Funding acquisition
      Halyna Voznyak, Vasyl Koval, Vira Druhova
    • Investigation
      Halyna Voznyak, Vasyl Koval, Olha Mulska
    • Methodology
      Halyna Voznyak, Olha Mulska
    • Project administration
      Halyna Voznyak
    • Resources
      Halyna Voznyak, Olha Mulska
    • Supervision
      Halyna Voznyak
    • Validation
      Halyna Voznyak, Halyna Kaplenko
    • Writing – original draft
      Halyna Voznyak, Halyna Kaplenko, Olha Mulska
    • Writing – review & editing
      Halyna Voznyak, Halyna Kaplenko, Olha Mulska
    • Formal Analysis
      Vasyl Koval, Vira Druhova, Olha Mulska
    • Visualization
      Vasyl Koval, Olha Mulska