Regional Disparities and Economic Growth in Ukraine

TL;DR

This study analyzes the widening regional economic disparities in Ukraine from 2004 to 2020, highlighting key factors like resource distribution, government spending, and migration, and emphasizing policy inefficiencies.

Contribution

It provides a comprehensive empirical analysis of regional disparities in Ukraine, identifying key determinants and policy shortcomings affecting economic growth.

Findings

Regional disparities have widened over two decades.

Government spending is highly concentrated in Kyiv.

Eastern Ukraine shows limited development despite opportunities.

Abstract

This research is devoted to assessing regional economic disparities in Ukraine, where regional economic inequality is a crucial issue the country faces in its medium and long-term development, recently, even in the short term. We analyze the determinants of regional economic growth, mainly industrial and agricultural productions, population, human capital, fertility, migration, and regional government expenditures. Using panel data estimations from 2004 to 2020 for 27 regions of Ukraine, our results show that the gaps between regions in Ukraine have widened last two decades. Natural resource distribution, agricultural and industrial productions, government spending, and migration can explain the disparities. We show that regional government spending is highly concentrated in Kyiv, and the potential of the other regions, especially the Western ones, needs to be used sufficiently. Moreover, despite its historical and economic opportunity, the East region performed little development during the last two decades. The inefficient and inconsistent regional policies played a crucial role in these disparities.