The impact of decentralization on the financial support of regional development

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Nowadays in Ukrainian realities decentralization, as a process of expanding and strengthening the rights and powers of administrative-territorial units, contributes to the development of financial innovations, the accessibility of public goods, and improvements in the quality of life of the population.
The aim of the article goal is developing the recommendations for improving the financial support of the regions by introducing new tools of influence of communities and local self-governments on the economic growth of territories.
Using the methods of factor analysis, regression analysis, and significant components, the article determines the impact of regional economic development on the revenues of local budgets. The empirical findings show the close correlation between budgetary decentralization and industrial capabilities of the regions. A cluster analysis was carried out to identify the asymmetries of regional development in terms of financial capacity. It enabled to distinguish homogeneous groups of areas according to the indicators of their economic development. On this basis the authors substantiated the necessity of entrepreneurial activity stimulating, increasing the number of companies, and promoting a continuous flow of goods (works, services) from the producer to the consumer in different regions of Ukraine.

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    • Figure 1. Types of decentralization
    • Figure 2. The structure of revenues of local budgets in Ukraine in 2015
    • Figure 3. The structure of inter-budgetary transfers in 2015
    • Figure 4. The share of transfers in local budget revenues of Ukraine in 2015
    • Figure 5. Graph of eigenvalues of components according to the scree plot method
    • Figure 6. Dendrogram of the results of clustering of Ukraine’s regions
    • Table 1. Advantages and disadvantages of decentralization
    • Table 2. Indicators of economic development of Ukraine’s regions in 2015
    • Table 3. Revenues of local budgets in Ukraine in 2015
    • Table 4. Correlation matrix of dependence between indicators
    • Table 5. Eigenvalues and the total variance of components
    • Table 6. Factor loading on the main components
    • Table 7. Results of the regression analysis
    • Table 8. The matrix of factor coefficients of the major components
    • Table 9. The values of the major components for the regions of Ukraine
    • Table 10. Average and median values by clusters Ukraine in 2015
    • Table 11. Average values of the major components by clusters