Inclusive Development of Ukraine: Problems and Prospects
Tetiana Kozhemiakina
, Vita Makarenko
, Kateryna Slyusarenko
and Inta Kotane
Department of Health Management, O.O. Bogomolets National Medical University, Victory Avenue, Kyiv, Ukraine
Institute of Management and Business Education, State University of Economics and Technology, Kryvyi Rih, Ukraine
Faculty of Economics and Management, Rezekne Academy of Technologies, Rezekne, Latvia
Keywords: Inclusive Growth, Inclusive Development Index, Ukraine, Emerging Economies.
Abstract: The essence of a new inclusive approach was analyzed. It is used, on the one hand, for definition of
measurement indexes and evaluation of current state of countries economic and social development; on the
other hand, as an instrument for the identification of countries strategy of perspective directions development.
The authors’ interpretation of the research methodology to determine the ways for achieving the main goal of
the country inclusive development was offered. It is carried out through the system characteristics of its
economics such as growth and development (productivity), environmental friendliness (sustainable
development), inclusiveness (involvement) and appropriate model. Essential, fundamental components of
inclusive development of Ukraine were identified and classified. The obstacles preventing such development
were revealed and effective mechanisms of overcoming the obstacles were suggested.
Transformational processes in the world have
extremely accelerated for last years that is accepted to
join it with increasing the speed of information of
creation. In this regard there is a need for determining
the new coordinate system and indicators for
measurement and evaluation the state of countries
economic and social development and defining its
future perspective ways. Now Ukraine is in such
situation when it should determine the strategic
priorities of transformation. After all the previous
experience proves that the success hasn`t been
achieved for 30 years of independence. This is
evidenced by the loss of positions on the world
and the low level of life. Based on the fact that the
world`s leading countries have started to evaluate the
success of its existence through the expanded system
of indicators which hasn`t been limited only by
economic component, it is expedient to consider the
state of Ukraine from the position of inclusive
development and identifying the existing problems, to
find out possible ways and mechanisms of their
b 0000-0002-5424-5084
c 0000-0002-2072-2997
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overcoming. Therefore, consideration of this problem
is looking so actual today.
OECD (2015) interprets the Inclusive growth as
«economic growth which creates opportunities for all
segments of the population and distributes advantages
in society more rightly from increased welfare in
monetary and non-monetary expression»
The World Bank experts and IMF (2021)
determine the Inclusive growth as resistant economic
growth that has the main goal – it`s reducing the
property and inequality. In such sense the world
economic forum also focuses on the poor, especially
in that part of workforce that is involved in activity
with the low productivity and/or is fully excluded
from the process of growth.
Reza Hasmath (2015) summarizes in her work
that «This inclusive growth should be understood as
a model of economic development aimed at creating
and developing a balanced socio-economic system,
Kozhemiakina, T., Makarenko, V., Slyusarenko, K. and Kotane, I.
Inclusive Development of Ukraine: Problems and Prospects.
DOI: 10.5220/0011342200003350
In Proceedings of the 5th International Scientific Congress Society of Ambient Intelligence (ISC SAI 2022) - Sustainable Development and Global Climate Change, pages 108-116
ISBN: 978-989-758-600-2
2022 by SCITEPRESS Science and Technology Publications, Lda. All rights reserved
taking into account social equality, environmental
protection and natural resources. In the same way,
inclusive growth is understood as economic growth
aimed at increasing wealth and reducing inequality
through an open and equitable distribution of wealth
among the population».
The purpose of the article is defining the essential,
fundamental components of inclusive development of
Ukraine and searching for effective mechanisms of
overcoming obstacles that arise along the way of this
The world science community elaborates new
indicators which could allow to measure and evaluate
the successful development of countries in modern
realities. The question of Inclusive Development has
been elaborated by scientists for a long time.
Inclusiveness in macroeconomic meaning is
considered like the opposite to poverty and
inequality. After all, poor segments of the population
of either country are completely removed from the
process of creation the useful product and word in
«tin» sphere or work with the lowest productivity. It`s
lower than the average level of labor productivity in
the country.
The world has been already divided into
economically developed and not economically
developed, we speak about advantages of the Service
Industries over the sphere of production in creation
the GDP and focus on people`s satisfaction with life
in their country but we have still measured the
position of countries in the world ranking based on
the level of GPD per capita and don`t consider the size
of Gini index in evaluation. In Davos 2018 the
International forum stopped such evaluations and
emphasized that such approach is fully grounded and
don`t express the real state of cases concerning
development of the world. In return there is offered a
new approach to evaluation, there is the Inclusive
Development Index.
In 2018 in the International economic forum in
Davos there was represented to the general public the
indicator Inclusive Development Index. According to
experts this is the indicator that demonstrates us the
real state of the world economy through the
determination of capacity of every country to provide
economic benefits for all the citizens.
The index has been expected to change our
perception of real picture of the world. For Ukraine
such transformations mean that while choosing the
ways of developments and formation of state policy,
it must be necessarily considered how accepted
decisions are able to affect the level of country`s
Inclusive Development, that is whether there will be
economic growth (which, we hope, not only will be
reached but will also acquire the signs of stability and
even acceleration) to benefit all citizens of Ukraine.
Otherwise, it means only another round of local
oligarchs’ enrichment and further impoverishment of
the nation as a whole.
The Inclusive Development Index is a complicated
integral index which includes the evaluation of
economic and social development of the country and
indexes which are divided into three groups (fig. 1).
Such division fully complies with the concept which
is declared by the world community. The concept is
«Growth – Fortitude – Inclusiveness».
Figure 1: Inclusive Development Index.
The following research methods were used
theoretical ones such as analysis, synthesis, empirical
and statistical methods.
According to the data which was published at the
Worldwide economic forum in Davos in 2018,
Ukraine took the 49
place in the world among
developing countries and the last place in Europe
according to the level of such index.
Overall IDI score Inclusive Development Index
made up 3.42 and 5-year trend IDI overall is -6,8%
for Ukraine. It indicates extremely unsatisfactory
results of the country development and its negative
Inclusive Development of Ukraine: Problems and Prospects
Such far from developed countries as Honduras
place), Pakistan (47
place) and Tanzania (48
place) took higher places than Ukraine in the list and
demonstrated better results in development.
Honduras overall IDI score of Inclusive Development
Index made up 3.61 and 5-year trend IDI overall is
+2,03%, Tanzania overall IDI score Inclusive
Development Index made up 3.43 and 5-year trend
IDI overall is +3,86%. As for Pakistan, its overall IDI
score of Inclusive Development Index makes up 3.55
and 5-year trend IDI overall is equal to +7,56%.
Ukraine demonstrating negative rates of
economic and IDI growth has created poor image in
the international area. As a result, we may predict
further rating decline in the coming years.
Slow or even negative rates of economic growth
for the whole period of Ukrainian independence
caused the country lagging significantly behind the
GDP level per capita not only in comparison with
economically developed countries but also
comparing to the former Soviet Union republics.
Considering the components of «Inclusiveness» and
«Environmental friendliness» you should bear in
mind that Ukraine lags far behind according to these
On the report of the World Economic Forum
(2017), the worst components of IDI for Ukraine were
such as follows:
- financial intermediation of real economy
Investment (only such components as Domestic credit
to private sector by banks (% of GDP) and Private
R&D Expenditure (% of GDP) had a positive impact
on IDI. At the same time other components such as
Local capital market access, Venture capital
availability, Large and Small Cap IPOs to NFCs
(weighted per $100 Billion USD GDP)) were adverse.
Corruption and rent-seeking demonstrate highly
negative meanings among almost all the components
of Indexes (business and political ethics, judicial
independence, diversion of public funds, irregular
payments in tax collection, ethical behavior of
companies, irregular payments in public contracts,
favoritism and nepotism in government officials
decisions, concentration of rents, extent of market
dominance, intensity of competition, effectiveness of
antitrust policy, concentration of banking sector
assets). But despite all the above mentioned the
highest index of the group is the public trust to
politicians, which suggests that citizens of Ukraine are
influenced by propaganda from the side of dishonest
politicians through the media.
Asset building and entrepreneurship had some
unfavorable indexes among the negative indicators
such as protection of property rights, private pension
assets (% GDP), cost of resolving insolvency (% of
estate value) and contract enforcement cost (% of debt
Fiscal transfers contain such components as
Extent and effect of taxation on incentives to work,
Extent effect of taxation on incentives to invest, Total
tax wedge (% of labor cost).
Comparisons of IDI components of Ukraine and
other countries are given in the table 1.
Table 1: Comparison of IDI components in different
Group of
lace 10 11 19 49
H &
Growth, %
3,7 2,5 0
y Growth,
4,0 1,3 0 -3,2
y Trend,
1,7 1,2 2,4 1,9
nt Trend,
0,9 3,2 -0,3 0
Gini Tren
0,6 0,9 0,7 -0,6
Trend, %
-0,5 -0,4 0 0,3
Gini Tren
-10,7 -9,6 -10,5 0,1
Trend, $
0,3 2,4 -0,1 -0,6
Trend, %
1,9 3,4 -3,2 -0,7
Trend, Kg
Per $ Of
-3,7 -6,3 -13,8 -32,7
Trend, %
1,6 11,2 5,3
y Ratio
Trend, %
2,1 4,9 5,0 2,6
Source: World Economic Forum
ISC SAI 2022 - V International Scientific Congress SOCIETY OF AMBIENT INTELLIGENCE
As Table 1 shows, Ukraine has the most severe
problems with economic growth, declining
productivity and public debt rising.
We should emphasize that the best indicators are
shown by the countries which have joined the
European Union. They show economic growth,
productivity increase, median income rise, poverty
reduction, public debt decrease and others.
Meanwhile, the best indicator for Ukraine is the
declining trend in carbon intensity. However, it is
mostly due to reduced industrial production, which,
in its turn, is a negative factor.
It should be taken into consideration that the
collection of statistics in Ukraine is somewhat
different from European and international practices.
Some indicators are not recorded by the State
Statistics Committee of Ukraine, which complicates
the calculations.
There is also a substantial discrepancy between
country statistics and real state of affairs. This
deviation is due to a significant share of the «shadow
sector» in economics, which, according to reliable
data, is at least 60 percent of Ukraine's economy.
In practice, Ukrainians face many problems in
inclusive development. In particular, it is
unavailability of vital space for people with
disabilities and inaccessibility of medical care for all
segments of the population except for the wealthy.
Legal requirements for inclusive infrastructure
and public institutions are perceived by business
entities with neglect of standards which makes them
unusable. Besides, implementation of the medical
reform provisions is slowed down by insufficient
funding from the state and by the active resistance of
local entities whose personal financial interests are
At the same time, it is worth pointing out that the
reforms started under President Poroshenko have
already yielded positive results.
Ukrainian economics has undergone the greatest
systemic changes due to decentralization reform.
The essence of decentralization reform is to divide
the country into united territorial communities. Thus,
nowadays lion share of the taxes remain in the
community where they are collected. Local self-
government has the right to decide on issues of local
importance themselves without involvement of other
official bodies.
Previously, taxes were accumulated in Kyiv and
distributed among the regions in the form of
subventions. It created significant opportunities for
misuse and corruption.
Today, communities set their own priorities in the
use of funds. Consequently, their members can
control the efficiency of the expenditures more
effectively. The state conducts public consultations
with communities and all-Ukrainian associations of
local self-government.
In addition, some progress in health care reform
has been witnessed. Signing of declarations with
family doctors at the primary level was very quick.
Just in the first half of 2018, 25 million Ukrainians
signed declarations with family doctors. It gave
opportunity to rise funding for primary care and
increase the salaries of doctors. Doctors received a 3-
4-fold increase in salaries, which significantly
improved their attitude to health care reform.
Secondary and tertiary levels, where the reform
did not come so quickly, unfortunately, were not so
successful in terms of reforming their activities. Quite
low tariffs do not allow hospitals to provide patients
with quality medical services.
The most painful problems of healthcare
transformation in Ukraine were such as:
- unwillingness of hospitals to switch to funding
to pay for the results of work (money follows the
- lack of hospitals readiness to implement patient-
oriented service;
- weakness of hospital unions in defending the
interests of teams in wages and salaries;
- cases of abuse by management in the payment
- biased official competitions for replacement of
hospital management positions and other.
The most difficult factor in opposing the reform
was reaction of doctors and patients, who did not
realize the essence and prospects of the reform.
Unfortunately, the reform of the judicial system
introduced by President Petro Poroshenko has not
been implemented yet. The reason for it was the short
deadlines for its implementation.
The Ukrainian law enforcement system has also
remained partially reformed.
The whole system of anti-corruption bodies was
created in Ukraine to fight corruption. Namely, they
- National Council on Anti-Corruption Policy;
- National Anti-Corruption Bureau of Ukraine;
- National Agency for the Prevention of
- Specialized anti-corruption prosecutor's office;
- State Bureau of Investigation;
- Supreme Anti-Corruption Court.
During the tenure of the fifth President of Ukraine
Petro Poroshenko, first lady Maryna Poroshenko took
care of inclusive education. The goal of the inclusion
project was to create and develop an inclusive
Inclusive Development of Ukraine: Problems and Prospects
educational environment for children with special
needs in secondary schools.
New educational institutions were created within
the project, the position of a teacher's assistant was
introduced, and special educational materials were
published. The textbook «Inclusive Education» by
Maryna Poroshenko is one of them.
Owing to the introduction of inclusion, the
number of children with special needs who have the
opportunity to learn fully increased almost tenfold -
from two and a half thousand to 24 thousand students.
Unfortunately, these steps were not enough to
improve the state of inclusive development of
Ukraine significantly.
We use the IDI model to identify problems and
assess development prospects. The model of IDI is
perfectly suitable for the identification of
development problems of the country and defining
prospects for its improvement. The ultimate goal of
the world community according to the direction of
Inclusive growth is formulated as «Growth
Fortitude – Inclusiveness».
According to the economic terms achievement of
such goal is possible through three system
characteristics of countries economy: productivity
environmental friendliness involvement which, in
its turn, can be divided into components of lower
level (fig. 2).
Figure 2: Components «Growth Sustainability
Inclusiveness» as a goal of the World Community
Basing on the above-mentioned components, we
can identify reasons of unsatisfactory economic
growth rates in Ukraine in the 21st century which are
as follows:
А. As for the component of productivity:
- using the outdated technique in all economic
spheres and branches (Table 2);
- applying the outdated technologies in all
economic spheres and branches;
- using the outdated control technologies in all
economic spheres and branches;
- insufficient staff qualifications, non-compliance
of qualifications to the modern structure of the world
- insufficient staff motivation because of the low
wages; limitation and imperfection of methods and
mechanisms of motivation (Fig. 3.).
B. Regarding the component of environmental
- high resource intensity of production of goods,
works, services (material consumption, energy
consumption, fuel consumption, human capacity etc.)
(Fig. 4);
- too low component removal rate when using
- no resources recycling and reusing;
- high level of emissions into the environment in
process of product production.
C. Concerning the involvement component:
- insignificant part of society which is involved in
product creation in the form of labor;
- a significant part of society which is excluded
from the product creation because of departure to
work abroad;
- a significant part of perspective youth which is
removed from the process of labor reproduction and
from Ukrainian society in future because of getting
the education abroad and desire to stay there for
permanent residence;
- a significant part of society which is involved in
product creation in the form of labor in «grey» sector
of economy;
- excluding people with specific, special needs
from the formation of aggregate demand;
- insignificant part of society that takes part in
formation of investments in the economy,
concentration of financial resources in the hands of
«an oligarchy».
ISC SAI 2022 - V International Scientific Congress SOCIETY OF AMBIENT INTELLIGENCE
Table 2: The degree of depreciation of fixed assets (2018).
Type of economic activity
Agriculture, forestry and fisheries
Mining and quarrying
Total manufacturing
Including the following:
- Manufacture of wood products, paper
production and printing
- Metallurgical production, production of
finished metal products
- Manufacture of other machinery and
- Manufacture of motor vehicles,
trailers and semi-trailers and other transport
Supply of electricity, gas, steam and air
Water supply; sewerage, waste
Wholesale and retail trade; repair of motor
vehicles and motorcycles
Transport, warehousing, postal and courier
Temporary accommodation and catering
Information and telecommunications
Publishing, production of motion picture
and video films, television programs,
publishing of sound recordings, activity in
the field of radio and television
Financial and insurance activities
Real estate transactions
Professional, scientific and technical
Activities in the field of administrative and
support services
Source: State Statistics Committee of Ukraine
Figure 3: Minimum wage in Ukraine and some European
countries (2021), Euro.
Figure 4: Primary energy intensity of Ukraine 's GDP,
compared to Europe and Germany, 2009-2014 (kg of oil
equivalent per $ 1. USA -kg AD / $ 2005).
Following the results of 2017, it was indicated in
the report of the Worldwide Economic Forum (2018)
that improving the workers training, simplification of
the starting up procedure and registration of a new
business and entrepreneurs’ access to financial
resources, strengthening the fight against corruption
must become priority areas of Inclusive Development
in Ukraine.
At present, in 2021 we can see only one positive
step ahead which is simplification of the new business
creation and registration procedure.
The problems of Ukrainian education should be
dwelt upon in particular. In terms of public spending
on education in GDP, Ukraine is one of the leaders in
the world. While OECD countries spend on average
of 5.0-5.2% of GDP on education, Ukraine spends
6.2% of GDP on education. But, due to low level of
Ukraine GDP, everything is not all rosy in monetary
terms. (Zherebylo, 2018)
As a result, educators receive low salaries and
have low interest in the quality of their work. The
average age of employees at all levels of education is
increasing. It is explained by the fact that young
people are not interested in long term working for a
salary lower than the cashier’s of the supermarket.
Education in Ukraine is characterized by students’
achievements being lower than in most EU countries.
It is evidenced, in particular, by the low positions of
Ukrainian universities in European and global
rankings. Attempts to reform the education by
granting autonomy to universities have not yet
yielded tangible results.
An important shortcoming of the country's
education system is the unequal access to quality
education. In particular, rural students often do not
have the opportunity to receive adequate secondary
education. Consequently, such children have
problems with higher education in future.
Inclusive Development of Ukraine: Problems and Prospects
There are also problems with the effectiveness of
education funding in Ukraine. Secondary education
has not responded to demographic change in the
country since gaining independence. Thus, the
number of schoolchildren in 1991-2018 decreased by
43.3%. The number of general secondary education
institutions decreased by 28.9% and the number of
teachers - by 17.9%. Accordingly, schools lack funds
both for teachers' salaries and for updating the
material base. (Tarasenko, 2021)
Rapid urbanization led to an increase in the share
of the local population which caused differences in
the number of students in classes in urban and rural
schools. One teacher in the city has twice as many
students as a village teacher, and there are four times
as many students in a city class.
In general, it can be stated that the education
system is not in line with the strategic goals of the
country's development.
Besides, the problem of inconsistency of curricula
and teaching methods with modern requirements still
Poor education and training results are manifested
in the inability of the graduates of higher and
vocational education to meet the needs of the labor
As a result, the country is experiencing an acute
shortage of skilled workers and difficulties in
employing graduates.
Updating the workers’ training does not take place
due to low interest in such education from Ukrainians
because representatives of working professions don`t
get high salary. Therefore, these workers prefer
temporary work or even constant labor migration to
the EU countries.
Such migration process is quite justified, because
the average purchasing power per capita in Europe in
2021 is 15,055 Euros, while in Ukraine this figure is
only 1892 Euros per capita. This is less than 13
percent of the European average figure.
25 percent from 3 million migrants who arrived in
the EU in 2019 were Ukrainians. That makes up
757,000 people out of nearly 3 million who came.
The largest number of labor migrants from
Ukraine go to Poland. According to the Polish
Foreign Ministry (2020), Polish consulates issued
almost 900,000 visas to Ukrainians in 2019, from
which 895.7 thousand were national visas (Fig. 5).
Source: Main Statistical Office of Poland
Figure 5: The number of foreigners who were in Poland as
of December 31, 2019.
The failure to fight corruption is one of the
reasons for lack of entrepreneurs’ access to cheap
financial resources which are necessary for starting a
The serious problem for the development of
economy of Ukraine is transferring significant part of
tax burden by ill-considered and populist innovations
of digitalization from large business to small and
midsize business, replacement of cheaper energy
resource for more expensive one that is immediately
reflected on the value of goods and services and many
Using the proposed model (fig. 2) according to
identified reasons for the slow growth rate, we can
form a list of ways to overcome such backwardness.
A. As for the component of productivity:
- renewal the outdated technique in all economic
spheres and branches;
- renewal the outdated technologies in all
economic spheres and branches;
- renewal the outdated control technologies in all
economic spheres and branches;
- transformation of education for providing staff
teaching and retraining according to modern
requirements and modern structure of world
- more balanced approach to innovation of
digitalization and taxing, and their introduction to
small and midsize business only after qualified and
deep research of essence and effects of realization
such innovations. Creating effective mechanisms
their realization in contrast to nowadays «populis
and superficiality;
- increase the level of payment of staff such as
taking part in company`s profits etc.
B. Regarding the component of environmental
ISC SAI 2022 - V International Scientific Congress SOCIETY OF AMBIENT INTELLIGENCE
- renovation of the outdated technique and
technology in all spheres and branches of economy
with an emphasis on progressive resource saving
and environmentally friendly technologies and
possibility of recycling and reusing resources;
- improving energy efficiency in all sectors and
areas of the economy.
C. Concerning the Involvement component:
- «de-shadowing» of the economy;
- formation of aggregate demand taking into
account the needs of the people with specific, special
needs, its expansion due to satisfaction such needs;
- «de-oligachization» of economy;
- formation the favorable climate for creation of
small and midsize business entities by citizens of
As follows, the modern model of IDI is comfortable
for the identification of development problems of the
country and researching for prospects its
improvement. Achievement of the triune goal of the
inclusive development of a country «Growth
Sustainability – Inclusiveness» is possible through
system characteristics its economy. Productivity –
environmental friendliness involvement which are
divided into set of components of lower level. Based
on such model, we can single out a number of reasons
for the unsatisfactory paces of inclusive growth in
Ukraine in the 21
century and there were offered a
list of ways to overcome such bachwardness.
The conducted studies showed that a number of
reforms were carried out in Ukraine in 2014-2019,
which addressed some issues of social development,
such as inclusive education, and laid the grounds for
fundamental institutional changes in society and the
economy, in particular, decentralization, medical and
anti-corruption reforms. Their implementation is to
improve the level of inclusive development of
Ukraine significantly.
At the same time, it should be pointed out that
after 2019 there is a slowdown in reform processes,
which produces a negative impact on inclusive
development and will undoubtedly lead to
deterioration in the values of the Ukraine IDI.
The main problems of inclusive development in
Ukraine were identified as follows:
1. Low level of labor productivity associated with
the obsolescence of machinery and production
technologies, as well as poor motivation of workers.
2. Low level of energy efficiency in all spheres
and branches of economy.
3. The complexity of doing business.
4. Unsatisfactory quality and lack of accessibility
to education, especially at the vocational training
level and in rural areas.
5. Unsatisfactory quality and unavailability of
medical care for the population.
6. High level of corruption and "shadowing" of the
7. Inefficient system of small and medium
business taxation.
8. Extreme level of workers’ and employees’
labor migration with subsequent residence permits
and moving to other countries for permanent living.
9. Low standards of living, wages and salaries.
In our opinion, in order to accelerate the inclusive
development of Ukraine in the context of identified
three systemic characteristics of the country's
economy: productivity-environmental-involvement,
it is necessary to implement such measures as:
1. Updating of equipment and technology, energy
efficiency increasing of all branches of economics.
2. Economy de-shadowing.
3. Active reform of such socially significant areas
as medicine and education.
4. Preventing the implementation of corruption
5. Attracting foreign investment and creating
favorable opportunities for Ukrainian entrepreneurs
to do business and create new jobs.
6. Wage and salary Increasing.
Comprehensive implementation of above-
mentioned measures accelerates inclusive growth in
consistence with Ukraine's potential.
Taking into consideration the complexity and
complication of the issue, there is an urgent need for
further research involving a special apparatus of
economic and mathematical modeling.
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