Applying fiscal instruments of development of regions’ social sphere under conditions of neoindustrialization

Valentin P. Vishnevsky, V. D. Chekina, Olesia V. Viietska


Conceptual positions of the application of fiscal instruments with a view to ensuring the development of the social sphere of the regions based on the modern theory of economic decentralization have been considered. On the basis of the principles of fiscal balance and subsidiarity the allocative powers that are advisable to assign to the different levels of sub-central government have been determined as well as the appropriate revenue sources that are able to provide funding for these powers. The distribution and financial provision of the powers of sub-central authorities have been examined by the example of the European experience, which is founded by the choice of the European vector of social and economic reforms in Ukraine. It has been established that in a situation of recession or slowdown in economic growth the decentralization opportunities related to the transfer of spending authority to the local governments are limited. And conversely, prolonged periods of economic recovery that occurred in recent decades in many EU countries as a whole have contributed to decentralization processes. The structure and revenue sources of the sub-central authorities in particular countries of the European Union have been studied, the degree of their fiscal autonomy has been determined. It was found that in cases of the division of powers between the central government and sub-central authorities connected with provision of social services (which are characterized by a "blurred" sphere of benefits and the presence of significant external effects) it is necessary to follow the requirements of the economic theory of decentralization. It is proved that the key proposition of fiscal decentralization at the present stage of development of the Ukrainian economy should be focused on the decentralization of budget revenues aimed at increasing the relative importance of own sources of sub-central authorities at the expense of increasing their tax opportunities and reducing the volume of inter-budgetary transfers. For this purpose it is advisable to analyze and revise the current distribution of the tax powers and the tax bases between the levels of government taking into account the major conceptual and administrative provisions of the economic theory of decentralization aimed at the increasing the real degree of sub-central financial autonomy.


fiscal instruments; regions’ social sphere; theory of decentralization; financial autonomy; local governments

Full Text:



Bergvall, D., Charbit, C., & Kraan, D.-J. (2006). Intergovernmental transfers and Decentralised public Spending. OECD Journal on Budgeting, 5(4), 111-158. DOI:

Bikker, J., & Linde, D. (2015). The optimum size of local public administration. Utrecht School of Economics. Discussion Paper Series, 15-05.

Blöchliger, H. (2008). Market Mechanisms in Public Service Provision. OECD Economics Department Working Papers, 626.

Campos, J., & Vammalle, C. (2012). Financial resources, expenditures and debt of sub-central governments. Institutional and Financial Relations across Levels of Government, OECD Fiscal Federalism Studies, OECD Publishing, 87-126.

Dafflon, B. (2006). The assignment of functions to decentralized government: from theory to practice. Handbook of Fiscal Federalism. Cheltenham, UK, Northampton, MA, USA. (2016). Fitch worsened the outlook for Ukraine's economic growth to 1%. Informacionnoe agenstvo. Retrieved from­no­mi­ki-ukrainyi-po-itogam-etogo-goda-do-1.html [in Russian].

Council of Europe (2016). European Charter of Local Self-Government. Strasbourg 15.X.1985. Retrieved from

Eurostat (2016). Eurostat: Your key to European Statistics. Retrieved from

Fossati, A., & Panella, G. (1999). Fiscal Federalism in the European Union. London-New York: Routledge.

Gemmell, N., Kneller, R., & Sanz, I. (2013). Fiscal decentralization and economic growth: spending versus revenue decentralization. Economic Inquiry, 51(4), 1915-1931. DOI:

Gilbert, G., & Picard, P. (1996). Incentives and optimal size of local jurisdictions. European Economic Review, 40, 19-41. DOI:

OECD (2015). Government at a Glance. Paris: OECD Publishing.

Hermenier, H. (2008). Balancing democracy, identity and efficiency - Changes in local and regional structures in Europe. Council of European Municipalities & Regions.

McLure, C. (1999). The Tax Assignment Problem: Conceptual and Administrative Considerations in Achieving Subnational Fiscal Autonomy. Thailand: The National Economic and Social Development Board of the Royal Thai Government and the World Bank.

Mello, L. (2008). The Brazilian ‘Tax War’: The Case of Value-Added Tax Competition among the States. Public Finance Review, 36(2),169-193.

Mishan, J. (1969). The relationship between Joint Products, Collective Goods, and External Effects. The Journal of Political Economy, 77(3), 329-348. DOI:

Musgrave, R. (1959). The theory of public finance: A study in public economy. New York: McGraw-Hill.

Musgrave, R. (1961). Approaches to a fiscal theory of political federalism. In NBER, Public Finance: Needs, Sources and Utilization (pp. 97-133). NJ: Princeton University Press, Princeton.

Oates, W. (1968). The theory of public finance in a federal system. Canadian Journal of Economics, 1, 37-54. DOI:

Oates, W. (1972). Fiscal Federalism. New York: Harcourt Brace Jovanovich.

Oates, W. (1999). An essay on fiscal federalism. Journal of Economic Literature, 37, 1120-1149. DOI:

OECD (2016). OECD Fiscal Decentralisation Database. Retrieved from­database.htm#A_1.

Olson, М. (1969). The Principle of "Fiscal Equivalence": The Division of Responsibilities among Different Levels of Government. The American Economic Review, 59(2), 479-487. DOI:

Rodríguez-Pose, А., & Krøijer, A. (2009). Fiscal Decentralization and Economic Growth in Central and Eastern Europe. LSE ‘Europe in Question’. Discussion Paper Series, LEQS Paper, 12.

Rodrik, D. (2013, June) The Past, Present, and Future of Economic Growth. Global Citizen Foundation. Working Paper.

Rosen, H., & Gayer, T. (2008). Public Finance. NY: McGraw-Hill.

Slukhai, S. (2015). Ukrainian fiscal equalization: does it need an improvement? Bulletin of Taras Shevchenko National University of Kyiv. Economics, 1(166), 45-51.

Sutherland, D., & Price, R. (2005). Fiscal rules for sub-central governments: design and impact. OECD Network on Fiscal Relations Across Levels of Government. Working Papers, 1. DOI:

OECD (2011). Tax Competition Between Sub-Central Governments. Paris: OECD Publishing.

Tiebout, C. (1956). A pure theory of local expenditures. Journal of Political Economy, 64, 416-424. DOI:

Tiebout, C. (1961). An economic theory of decentralization. In NBER, Public Finance, Needs, Sources and Utilization (pp. 79-96). NJ: Princeton University Press, Princeton.

Tiebout, C. M. (1961). An economic theory of decentralization. In NBER, Public Finance, Needs, Sources and Utilization (pр. 79-96). NJ: Princeton University Press.

Weingast, B. (2014). Second Generation Fiscal Federalism: Political Aspects of Decentralization and Economic Development. World Development, 53, 14-25. DOI:

World Economic Forum (2015). The Human Capital Report - 2015. Retrieved from

Government Finance Statistics Division (2015). Budget of Ukraine - 2014. Kyiv: Ministry of Finance of Ukraine [in Ukrainian].

Volohova, І. (2010). Interbudgetary relations in Ukraine: current state and development prospects. Ukraine. Odesa: Atlant [in Ukrainian].

Glushhenko, V. (2014). Financial and economic security of economic entities in the context of decentralization in Ukraine. Ukraine. Kharkiv: HNU іmenі V.N. Kara­zіna [in Ukrainian].

Kirilenko, O. (2013). Achievement of strategic guidelines for improving intergovernmental fiscal relations in Ukraine. Finansy Ukrayiny, 8, 19-28 [in Ukrainian].

Korchagin, Ju. (2009). Efficiency of National Human Capital: Measurement Technique. Centr issledovanij regional'noj jeko­no­miki. Retrieved from [in Russian].

Krisovatij, A. (2015). The modern paradigm of Ukraine's fiscal policy in the context of the formation of a society for sustainable development. Ukraine. Ternopіl': TNEU [in Ukrainian].

Lunіna, І. (2010). Diversification of incomes of local budgets. Kyiv: Institute for Economics and Forecasting of the NAS of Ukraine [in Ukrainian].

United Nations (2015). Industrial Development Report - 2016. The role of technology and innovation in inclusive and sustainable industrial development. Overview. Vena: Organizacija Obedinennyh Nacij po promyshlennomu razvitiju [in Russian].

Furfur (2016). The fourth industrial revolution: the Internet of things, the circular economy and the blockbuster. Retrieved from [in Russian].

Jushkov, A. (2016). ‘Budgetary decentralization and regional economic growth: theory, empirics, Russian experience. Voprosy jekonomiki, 2, 94-111.



  • There are currently no refbacks.