№ 2/2020

Fìnansi Ukr. 2020 (2): 25–37https://doi.org/10.33763/finukr2020.02.025

BUDGET POLICY

STORONIANSKA Iryna ¹, BENOVSKA Liliya ²

¹SI “Institute of regional research named after M. I. Dolishniy of the NAS of Ukraine
OrcID ID : https://orcid.org/0000-0002-0237-1409
²SI "Institute of Regional Reseach named after M. I. Dolishniy jf the NAS of Ukraine"
OrcID ID : https://orcid.org/0000-0002-6987-5724

Financial equalization models: world practice

Financial equalization aims to minimize territorial disproportions of development arising from the uneven formation of the revenue base of local budgets of administrative and territorial units. The reform of administrative and financial decentralization in Ukraine is accompanied by the adjustments to the model of financial equalization of territorial development. These changes take place in the direction of modernization of the model – from equalization “by expenditures” of budgets to the equalization “by revenues”. The purpose of the study is to provide an in-depth analysis of financial equalization models in developed countries, the experience of which may have practical value for improving domestic equalization practices. In the article, there are thoroughly analyzed the world models of financial equalization and identified the domestic model. It is found out that the countries which use only one form of financial equalization are rare, for most countries the financial equalization model is a combination of different ways (vertical, horizontal, equalization by revenues, equalization by expenditures). The choice of the model of equalization by the country is influenced by the institutional structure of the state, the peculiarities of the administrative and territorial structure, the level of economic development of administrative and territorial units and their financial capacity, the level of decentralization of power, the state of standards’ development of social services. It is noted that financial equalization models of many countries have undergone modifications over the last decades, with increasing focus on equalization by expenditures. In view of the world practice, in the medium and long term perspective, the expediency of strengthening the role of equalization instruments by expenditures has been proved. However, it does not mean a return to the old scheme of financing of the need to finance the existing social infrastructure.

Keywords:financial equalization, models of financial equalization, budget, revenues, world experience

JEL: H62, H10, G18

STORONIANSKA I. . Financial equalization models: world practice / I. STORONIANSKA, L. Benovska // Фінанси України. - 2020. - № 2. - C. 25-37.

Article original in Ukrainian (pp. 25 - 37)

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