BUDGET DECENTRALIZATION AS AN INSTITUTIONAL REFORM: CAUSAL CHAINS AND CHANNELS OF IMPACT ON WELFARE

Анотація

The article develops a comprehensive analytical system for assessing the impact of budget decentralization on social welfare through the identification and operationalization of key impact channels under martial law conditions. Four basic channels of decentralization's impact on welfare are systematized: allocative (aligning expenditure structure with local needs), accountability and fiscal discipline (shortening agency chains and strengthening control), competition and benchmarking (inter-territorial comparison of results), and investment-innovation (increasing capital expenditures and technological innovations). The expansion of the basic model with war-adapted channels is substantiated: resilience (maintaining continuity of critical services through reserves and income diversification), security-emergency (civil-military coordination and simplified procedures), and reconstruction-investment (war risk insurance and municipal management of recovery projects). Based on the analysis of Ukrainian experience from 2014-2023, the transformation of decentralization mechanisms under the influence of war shocks is revealed, particularly the redirection of "military" personal income tax to the state budget with compensatory subsidies, which radically changed the revenue profiles of communities and strengthened transfer dependence. Practical policy instruments are proposed for optimizing intergovernmental fiscal relations during wartime through adjusting equalization formulas considering the intensity of hostilities, scale of destruction and needs of internally displaced persons, as well as institutionalizing business support and enterprise relocation to preserve the tax base of communities.

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