TRANSACTION COSTS OF INDUSTRIAL SECTOR AND THEIR IMPACT ON INDUSTRIAL MODERNIZATION

Abstract

Introduction. Preventing the industrial degradation and transition to a new quality of industrial development require the ensuring of effective institutional relations between industrial sector actors and other stakeholders, which today due to excessive bureaucratization of economic regulation compared to developed countries, corruption, judicial opacity systems, mismatches of market mechanisms exaggerated by excessive transaction costs reducing market flexibility and leading to the consolidation of inefficient business models of industrial enterprises. In this regard, in the study the estimations of the industrial sector transaction costs to determine their impact on industrial development are made and the recommendations for public policy to form effective institutional mechanisms for the industrial sector modernization are developed to stimulate progressive technological and innovative development of industrial production.

Materials and methods. To estimate the transaction costs of the industrial sector of Ukraine the approach of J. Wallis and D. North, who estimated the transaction costs in the American economy for the period 1870-1970 by direct calculation of wages of transactional sector employees in GNP, was used. The basic premise of measuring transaction costs has been the assumption of limited rationality when individuals are unable to fully predict the behavior of their counterparties. Such costs are considered as costs of labor, land, capital, and entrepreneurial skills used for exchange. The amount of transaction costs of the industrial sector included intra-firm labor costs of “transactional” professions and external costs of transactional sectors services. For calculation of transaction costs, the data of the State Statistics Service of Ukraine for 2012, 2016 and 2018 years were used.

Results and discussion. The results of the assessment of transaction costs in the industrial sector showed a twofold increase in their size and as a share in GDP in 2016 compared to 2012. In addition, the assessment of transaction costs by type of industrial activity in 2012, 2016 and 2018 showed their significant growth except for the raw materials sectors, as well as furniture production, other production and repair and installation of machinery and equipment. It is determined that these dynamics correlates with the rate of deindustrialization. In order to overcome the negative trends of transaction costs dynamics, recommendations to improve the institutional environment for technological modernization of industrial production, including market deregulation, promoting the development of network structures, including digital clusters, creating digital platforms for crosssectoral cooperation, boosting institutions for investments attraction and support were developed.

Conclusions. Thus, the transaction costs can be considered as a measure of the quality of the industrial modernization institutional environment. The dynamics of their growth suggests a significant role in the deindustrialization of the national economy. To prevent these trends, it is important to facilitate market exchange to attract new technologies and promote industrial modernization. The study proposes mechanisms that can be included in the basis of state industrial policy aimed at industrial modernization of the national economy.