BUSINESS INFORM JOURNAL.

УКР

ENG

Search:

REGISTRATION CERTIFICATE

KV #19905-9705 PR dated 02.04.2013.

FOUNDERS

RESEARCH CENTER FOR INDUSTRIAL DEVELOPMENT PROBLEMS of NAS of Ukraine (KHARKIV, UKRAINE)

ROR

EDRPOU 05481984

According to the decision No. 802 of the National Council of Television and Radio Broadcasting of Ukraine dated 14.03.2024, is registered as a subject in the field of print media.
ID R30-03156

PUBLISHER

Liburkina L. M.

CATALOG

Budget Crowding-Out under Rising Defence Expenditures: The Fiscal, Labour and Regional Effects in Ukraine
Artiushenko O. O., Tatarenkov O. V., Kopanytsia P. V., Zakharchuk O. V.

Artiushenko, Oleksandr O. et al. (2026) “Budget Crowding-Out under Rising Defence Expenditures: The Fiscal, Labour and Regional Effects in Ukraine.” Business Inform 8:376–391.
https://doi.org/10.32983/2222-4459-2026-8-376-391

Section: Finance, Money Circulation and Credit

Article is written in English
Downloads/views: 0

Download article (pdf) -

UDC 336.14:355.02(477)

Abstract:
The full-scale war ongoing in Ukraine has sharply increased defence expenditures, intensifying pressure on the State budget and the relevance of budget crowding-out. This study examines budget crowding-out in Ukraine during 2012-2024 through descriptive and comparative analysis of defence expenditures, tax revenues, the economically active population and regional tax capacity. The methodology combines statistical, comparative and time-series analysis of official Ukrainian fiscal and labour-market data, together with authorial calculations of defence expenditure per economically active person and a newly proposed regional defence-quota coverage coefficient. The share of tax revenues absorbed by defence expenditure rose from about 120% in 2022 to 174% in 2023, easing to roughly 140% in 2024; defence expenditure per economically active person rose almost 300-fold over 2012-2024. By 2023, even Kyiv, the best-performing region, covered only about half of the national defence quota per person from its own tax base, while frontline regions covered less than 5%. Labour-force estimates for 2022-2024 are authorial approximations due to suspended official surveys; the analysis is descriptive rather than causal and specific to Ukraine’s wartime context. Findings may help the Ministry of Finance assess fiscal sustainability, regional disparities and long-term defence-financing capacity. The results point to widening regional fiscal inequality, relevant to postwar recovery policy. The study integrates defence expenditure, labour-force dynamics and regional tax capacity into a single framework, including a new regional defence-quota coverage coefficient, quantifying national and territorial dimensions of wartime budget crowding-out.

Keywords: budget crowding-out; defence expenditures; defence procurement; tax revenues; labour force; regional tax capacity; fiscal sustainability.

Fig.: 5. Tabl.: 6. Bibl.: 44.

Artiushenko Oleksandr O. – PhD, Associate Professor, Department of Financial Support for Troops, Military Institute of Taras Shevchenko National University of Kyiv (81 Yulii Zdanovskoi Str., Kyiv, 03680, Ukraine)
Email: [email protected]
Tatarenkov Oleksandr V. – Cadet, Department of Financial Support for Troops, Military Institute of Taras Shevchenko National University of Kyiv (81 Yulii Zdanovskoi Str., Kyiv, 03680, Ukraine)
Email: [email protected]
Kopanytsia Petro V. – Student, National University of Defenсe of Ukraine (28 Povitroflotskyi Ave., Kyiv, 03049, Ukraine)
Email: [email protected]
Zakharchuk Oleksandr V. – Student, National University of Defenсe of Ukraine (28 Povitroflotskyi Ave., Kyiv, 03049, Ukraine)
Email: [email protected]

List of references in article

Alptekin A. & Levine P. (2012). Military expenditure and economic growth: a meta-analysis. European Journal of Political Economy, 4(28), 636–650. https://doi.org/10.1016/j.ejpoleco.2012.07.002
Anastasia G., Boeri T. & Zholud O. (2026). A wartime labor market: the case of Ukraine. RFBerlin, 125(41). https://www.rfberlin.com/research-insights/still-standing-the-ukranian-labor-market-at-war/
Azam M. (2020). Does military spending stifle economic growth? The empirical evidence from non-OECD countries. Heliyon, 12(6), e05853. https://doi.org/10.1016/j.heliyon.2020.e05853
Becker J. & Dunne J. P. (2023). Military spending composition and economic growth. Defence and Peace Economics, 3(34), 259–271. https://doi.org/10.1080/10242694.2021.2003530
Carter J., Ondercin H. L. & Palmer G. (2021). Guns, butter, and growth: the consequences of military spending reconsidered. Political Research Quarterly, 1(74), 148–165. https://doi.org/10.1177/1065912919890417
Chugunov I., Makohon V., Titarchuk M. & Krykun T. (2023). The budget policy of Ukraine under martial law. Public and Municipal Finance, 1(12), 1–11. https://doi.org/10.21511/pmf.12(1).2023.01
d’Agostino G., Dunne J. P. & Pieroni L. (2019). Military expenditure, endogeneity and economic growth. Defence and Peace Economics, 5(30), 509–524. https://doi.org/10.1080/10242694.2017.1422314
Derzhavna kaznacheiska sluzhba Ukrainy. Zvitnist pro vykonannia Derzhavnoho biudzhetu Ukrainy [Reporting on the implementation of the State Budget of Ukraine]. Derzhavna kaznacheiska sluzhba Ukrainy. https://www.treasury.gov.ua/file-storage/vikonannya-derzhavnogo-byudzhetu
Derzhavna podatkova sluzhba Ukrainy. Nadkhodzhennia podatkiv i zboriv [Receipt of taxes and fees]. Derzhavna podatkova sluzhba Ukrainy. https://tax.gov.ua/diyalnist-/pokazniki-roboti/nadhodjennya-podatkiv-i-zboriv--obovyaz/nadhodjennya-podatkiv-i-zboriv/
Derzhavna sluzhba statystyky Ukrainy. Ofitsiina statystychna informatsiia: derzhavnyi biudzhet [Official statistical information: state budget]. Derzhavna sluzhba statystyky Ukrainy. https://ukrstat.gov.ua/menu/budjet/budjet.html
Dimitraki O. & Emmanouilidis K. (2025). Interactional impact of defence expenditure and political instability on economic growth in Nigeria: revisited. Defence and Peace Economics, 4(36), 533–554. https://doi.org/10.1080/10242694.2024.2354992
Dimitriou D., Goulas E. & Kallandranis C. (2025). Spend on what? Insights on military spending efficiency. European Journal of Political Economy, 88, 102696. https://doi.org/10.1016/j.ejpoleco.2025.102696
Droff J. & Malizard J. (2026). French defense spending: war economy “a la francaise”. The Economics of Peace and Security Journal, 1(21), 47–64. https://doi.org/10.15355/epsj.21.1.47
Dunne J. P. & Smith R. P. (2020). Military expenditure, investment and growth. Defence and Peace Economics, 6(31), 601–614. https://doi.org/10.1080/10242694.2019.1636182
Dunne J. P. & Tian N. (2015). Military expenditure, economic growth and heterogeneity. Defence and Peace Economics, 1(26), 15–31. https://doi.org/10.1080/10242694.2013.848575
Emmanouilidis K. & Karpetis C. (2020). The defense-growth nexus: a review of time series methods and empirical results. Defence and Peace Economics, 1(31), 86–104. https://doi.org/10.1080/10242694.2018.1428261
Hanson R. & Jeon J. Y. (2024). The military expenditure-economic growth nexus revisited: evidence from the United Kingdom. Peace Economics, Peace Science and Public Policy, 2(30), 207–248. https://doi.org/10.1515/peps-2023-0059
HUS u Lvivskii oblasti. (2022). Rynok pratsi za rehionamy, sichen–cherven 2021 roku [Labor market by regions, January–June 2021]. HUS u Lvivskii oblasti. https://lv.ukrstat.gov.ua
International Labour Organization. ILO support to Ukraine recovery. International Labour Organization. https://www.ilo.org/regions-and-countries/europe-and-central-asia/ukraine/ilo-support-ukraine-recovery
Karaki M. B. & Safieddine H. (2023). Do defense news crowd out private investment?. Economics Letters, 233, 111421. https://doi.org/10.1016/j.econlet.2023.111421
Malizard J. (2015). Does military expenditure crowd out private investment? A disaggregated perspective for the case of France. Economic Modelling, 46, 44–52. https://doi.org/10.1016/j.econmod.2014.10.049
Ministerstvo finansiv Ukrainy. Zvitnist pro vykonannia Derzhavnoho biudzhetu Ukrainy [Reporting on the implementation of the State Budget of Ukraine]. Ministerstvo finansiv Ukrainy. https://mof.gov.ua/uk/current-year-budget-information
Ministerstvo finansiv Ukrainy. Derzhavnyi veb-portal biudzhetu dlia hromadian «Vidkrytyi biudzhet» [State web portal of the budget for citizens "Open Budget"]. Ministerstvo finansiv Ukrainy. https://openbudget.gov.ua
Petrukha S., Konovalenko D. & Petrukha N. (2025). State budget in the context of a wartime economy and post-war triggers for its recovery. Baltic Journal of Economic Studies, 1(11), 256–269. https://doi.org/10.30525/2256-0742/2025-11-1-256-269
Radionov Y. (2024). Management of budget expenditures in wartime. Finance of Ukraine, 10, 7–29. https://doi.org/10.33763/finukr2024.10.007
Raifu I. A. & Aminu A. (2023). The effect of military spending on economic growth in MENA: evidence from method of moments quantile regression. Future Business Journal, 9, 7. https://doi.org/10.1186/s43093-023-00181-9
Saba C. S. & Ngepah N. (2019). Military expenditure and economic growth: evidence from a heterogeneous panel of African countries. Economic Research – Ekonomska Istrazivanja, 1(32), 3586–3606. https://doi.org/10.1080/1331677X.2019.1674179
Saeed L. (2025). The impact of military expenditures on economic growth: a new instrumental variables approach. Defence and Peace Economics, 1(36), 86–101. https://doi.org/10.1080/10242694.2023.2259651
Tsyhanenko O. V., Samus H. I. & Medvid A. O. (2023). Derzhavnyi biudzhet Ukrainy: diahnostyka v umovakh voiennoho stanu [State budget of Ukraine: diagnostics under martial law]. Naukovyi visnyk Mukachivskoho derzhavnoho universytetu. Seriia «Ekonomika», 3(10), 58–66. https://doi.org/10.52566/msu-econ3.2023.58
Vagonova O., Lola V., Terkhanov F. & Bushtruk Y. (2025). Impact of global trends on Ukrainian fiscal policy under martial law. Democratic Governance, 1(18), 28–47. https://doi.org/10.56318/dg/1.2025.28
Yesilyurt F. & Yesilyurt M. E. (2019). Meta-analysis, military expenditures and growth. Journal of Peace Research, 3(56), 352–363. https://doi.org/10.1177/0022343318808841
zakon.rada.gov.ua. (2011, December 22). Pro Derzhavnyi biudzhet Ukrainy na 2012 rik [On the State Budget of Ukraine for 2012]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/4282-17
zakon.rada.gov.ua. (2012, December 6). Pro Derzhavnyi biudzhet Ukrainy na 2013 rik [On the State Budget of Ukraine for 2013]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/5515-17
zakon.rada.gov.ua. (2014, January 16). Pro Derzhavnyi biudzhet Ukrainy na 2014 rik [On the State Budget of Ukraine for 2014]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/719-18
zakon.rada.gov.ua. (2014, December 28). Pro Derzhavnyi biudzhet Ukrainy na 2015 rik [On the State Budget of Ukraine for 2015]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/80-19
zakon.rada.gov.ua. (2015, December 25). Pro Derzhavnyi biudzhet Ukrainy na 2016 rik [On the State Budget of Ukraine for 2016]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/928-19
zakon.rada.gov.ua. (2016, December 21). Pro Derzhavnyi biudzhet Ukrainy na 2017 rik [On the State Budget of Ukraine for 2017]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/1801-19
zakon.rada.gov.ua. (2017, December 7). Pro Derzhavnyi biudzhet Ukrainy na 2018 rik [On the State Budget of Ukraine for 2018]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/2246-19
zakon.rada.gov.ua. (2018, November 23). Pro Derzhavnyi biudzhet Ukrainy na 2019 rik [On the State Budget of Ukraine for 2019]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/2629-19
zakon.rada.gov.ua. (2019, November 14). Pro Derzhavnyi biudzhet Ukrainy na 2020 rik [On the State Budget of Ukraine for 2020]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/294-20
zakon.rada.gov.ua. (2020, December 15). Pro Derzhavnyi biudzhet Ukrainy na 2021 rik [On the State Budget of Ukraine for 2021]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/1082-20
zakon.rada.gov.ua. (2021, December 2). Pro Derzhavnyi biudzhet Ukrainy na 2022 rik [On the State Budget of Ukraine for 2022]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/1928-20
zakon.rada.gov.ua. (2022, November 3). Pro Derzhavnyi biudzhet Ukrainy na 2023 rik [On the State Budget of Ukraine for 2023]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/2710-20
zakon.rada.gov.ua. (2023, November 9). Pro Derzhavnyi biudzhet Ukrainy na 2024 rik [On the State Budget of Ukraine for 2024]. Verkhovna Rada Ukrainy. https://zakon.rada.gov.ua/laws/show/3460-20