Decentralization Reform and Redistribution: Evidence from Ukraine

• In Event: Poster Session: Political Economy

Abstract

How does political and fiscal decentralization affect redistribution in lower-middle income countries? I address this question by studying the effect of decentralization reform on public sector budgetary expenditures in Ukraine in 2015-2020. Starting from 2015, Ukrainian urban territorial communities (TEs) had an opportunity to gain control over local budgetary revenues and expenditures, as well as to gain political independence from the central authorities. Decentralization reform allowed local councils and mayors to determine the level of spending on public goods provision in administrative, law enforcement, business support, environmental protection, infrastructure, education, and welfare sectors. Difference-in-difference analysis shows that decentralization was associated with increased expenditures on welfare and public goods provision. The findings suggest that the electoral pressure of decentralized democratic institutions prompts local authorities to engage in redistributive practices and introduce long-needed changes in management of local budgetary funds.

Author

• Anastasiia Vlasenko, Columbia University