Local Power, Global Scores: Effects of Decentralization Reform on Ukraine’s School Graduate Outcomes

Abstract

This paper estimates the causal effect of fiscal decentralization and newly gained spending autonomy on educational outcomes in Ukraine. Exploiting the staggered voluntary formation of amalgamated local governments (hromadas) between 2015 and 2020, we use an event-study design applied to student-level standardized exam scores for some 140 thousand graduates in 2018–2019. Decentralization improved the overall academic performance across all subjects taken for below-median students by approximately 20 percent while reducing outcomes for above-median students by roughly 5 percent, revealing an equity-excellence trade-off. The effects are heterogeneous across subjects: decentralization improved STEM achievement across the entire performance distribution, whereas in the humanities, gains for lower-performing students were offset by losses among high achievers. The reform’s benefits were concentrated in lower-income hromadas, where an expanded fiscal base and greater local control over education spending drove the largest improvements. Urban hromadas experienced stronger performance gains than rural ones, where teacher shortages may have constrained the reform’s effectiveness. Overall, the findings indicate that decentralization reform has been a significant force for reducing educational disparities; however, complementary investments, particularly in teacher quality, are needed to realize the reform’s full potential and to support high achievers.