Congruence of interests of the center and regions in the course of intergovernmental relations regulation

Economic Annals-XXI: Volume 130, Issue 5-6(2), Pages: 37-40

Citation information:
Velenteichyk, N. (2013). Congruence of interests of the center and regions in the course of intergovernmental relations regulation. Economic Annals-XXI, 5-6(2), 37-40. https://ea21journal.world/index.php/ea-v130-11/

Nataliya Velenteichyk
Post-Graduate Student,
Volodymyr Dahl East Ukrainian National University, Lugansk, Ukraine
velentejchiknata@mail.ru

Congruence of interests of the center and regions in the course of intergovernmental relations regulation

Abstract. This article reviews theoretical aspects of the government regulation of inter-budgetary relations in Ukraine considering the different interests of the central and local governments. This study investigates the essence of central and regional governments’ interests and the meaning of congruence between their interests. Further, it examines the situations when the interests of the central and regional governments concur or complement each other and the situations when there is a discrepancy or conflict of interests between them. The author assumes that the conflict of interests of participants constrains economic and social development of the country; it reduces the quality of public authorities’ performance and hampers the effective implementation of fiscal policy. Therefore, this conflict of interests requires effective resolution.

The current study offers the theoretical model of alignment between the interests of central and regional budgets in the course of intergovernmental regulation. Further, it defines the essence of intergovernmental transfers as the instrument of congruence between these interests. The research examines the key interests of the central and regional budgets and their change in the course of intergovernmental regulation. Application of economic modeling methods allows defining functions of individual and common interests of intergovernmental relations participants. Also, this modeling helps to observe the influence of various intergovernmental grants on those interests (equalization grants, funds transferred to the state budget, subventions on investment programs, subventions to public social protection programs). The study defines conflicts caused by different types of intergovernmental transfers and proposes the ways of their resolving that should increase efficiency of intergovernmental regulation. As a result, the author comes to conclusion that among these ways are: application of equalization grants that contain a stimulating component; avoidance of the situation when funds are transferred from regional to the central budget; rational definition of public authorities’ responsibilities and provision of local governments with sufficient financial resources; selection of common strategic objectives of the government budget policy at central and local levels.

Keywords: Interests; Intergovernmental Transfers; Subsidies; Subventions

JEL Classification: Η70; Η72; Η73; Η77; Η79

References

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Received 04.04.2013