Empirics of investment – social and economic development causal nexus in Ukraine (case study of the Lviv region of Ukraine)

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The development of regional socio-economic systems relies on investments as a key factor for expanded reproduction, creating a cyclical process in which investments drive development, generating resources for further investments. This paper aims to empirically investigate the nexus and causal link between investments and the socio-economic development of a region in Ukraine (Lviv region as a case study). The research methods include VAR modeling (to assess the elasticity of investment processes to environmental factors), Forward Stepwise (to examine the impact of investment on socio-economic development), and extrema (to determine optimal investment resource points). The data for the Lviv region of Ukraine from 2005 to 2023 serve as the information and analytical basis of the study. The article identifies key economic factors, such as employment growth (elasticity: 2.65%) and the number of large and medium-sized enterprises (1.39%), and financial factors influencing investment processes. Financial factors include the growth of personal income tax revenues (4.78%), economic activity expenditures (0.81%), and subsidies (0.49%) in the short term, while tax independence (1.35%), local taxes and fees (2.47%), and economic activity expenditures (0.94%) are significant in the long term. It is estimated that a 1% increase in capital or foreign direct investment boosts socio-economic development by 0.12% and 0.5%, respectively, with foreign direct and capital investments ensuring socio-economic development at 0.45%. The use of constructed models for forecasting and planning investments in the Ukrainian regions allows for optimizing resource allocation, avoiding excessive costs, and ensuring economic stability in the face of global shocks and crises.

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    • Figure 1. Optimum of capital investments to ensure the socio-economic development of the Lviv region from 2005 to 2023
    • Figure 2. Optimum of foreign direct investment to ensure the socio-economic development of the Lviv region from 2005 to 2023
    • Figure B1. Gross regional product and income of the population
    • Figure B2. Innovative performance
    • Figure B3. Export of goods and services
    • Figure B4. Budgetary performance
    • Table 1. Elasticity coefficients of the investment processes and socio-economic development of the Lviv region from 2005 to 2023
    • Table A1. Elasticity of capital investment to changes in the determinants of the investment environment in the Lviv region from 2005 to 2023
    • Table A2. Elasticity of foreign direct investment to changes in the determinants of the investment environment in the Lviv region from 2005 to 2023
    • Conceptualization
      Ruslan Boiko, Taras Vasyltsiv, Yaroslav Berezivskyi
    • Formal Analysis
      Ruslan Boiko, Vitalii Boiko, Taras Vasyltsiv
    • Investigation
      Ruslan Boiko, Taras Vasyltsiv
    • Methodology
      Ruslan Boiko, Nataliia Mahas, Yaroslav Berezivskyi
    • Resources
      Ruslan Boiko, Vitalii Boiko
    • Supervision
      Ruslan Boiko, Taras Vasyltsiv
    • Validation
      Ruslan Boiko, Rostyslav Baran, Taras Vasyltsiv
    • Writing – original draft
      Ruslan Boiko, Rostyslav Baran, Vitalii Boiko, Taras Vasyltsiv, Nataliia Mahas, Yaroslav Berezivskyi
    • Writing – review & editing
      Ruslan Boiko, Rostyslav Baran, Vitalii Boiko, Taras Vasyltsiv, Nataliia Mahas, Yaroslav Berezivskyi
    • Funding acquisition
      Rostyslav Baran, Vitalii Boiko
    • Visualization
      Rostyslav Baran, Nataliia Mahas, Yaroslav Berezivskyi
    • Project administration
      Taras Vasyltsiv
    • Data curation
      Nataliia Mahas, Yaroslav Berezivskyi