Decentralization, Public Goods Provision, and Corruption: Evidence from Ukraine

• In Event: The Subnational Turn (I): Decentralization and Political Economy

Abstract

How do institutional reforms affect public goods provision in weekly-institutionalized democracies? I study this question by examining the effect of decentralization on local budgetary expenditures in Ukraine in 2015-2020. In 2014, the government of Ukraine initiated decentralization reform which allowed village, town and city councils to gain wider administrative, financial, and fiscal independence if they agreed to form so-called amalgamated territorial communities (ATCs). Difference-in-differences estimates show that establishment of ATCs increased expenditures on local infrastructure and decreased expenditures on funding of local authorities. This effect can be explained by local incumbents’ increased accountability and limited possibilities of corruption, as reflected by decreased proportion of unidentified income in tax declarations of elected public officials in ATCs. Thus, even under weak democratic institutions, decentralization can have immediate effect on public goods provision by preventing rent-seeking behavior of local administrations.

Author

• Anastasiia Vlasenko, Florida State University