A new paradigm of the analysis of the public sector of the economy in the conditions of institutional transformations is substantiated in the dissertation. The results of the study show the active use of methods of state regulation of the public sector in order to achieve the economic equilibrium between the offer and distribution of social welfare. The institutional environment of public sector existence as an area of the development of economic processes, where the elements of material and cultural life of society are combined, is analyzed. On this basis, the structural components of the social sector of the economy in their interaction with the innovative factors of development associated with the formation of human and social capital in the context of the theory of social welfare are analyzed. The dynamics of the global economy has led to the emergence of many new problems regarding the provision of public goods and the improvement of material welfare. We have revealed the complexity and ambiguity of approaches to the definition of the content of the public sector of the economy, its connection with the private and "third" sectors, and their interaction with the innovative dynamics of economic changes and the institutional environment. We have also considered the public sector in the context of geoeconomic and geopolitical processes, which cause problems and impose new requirements to ensuring material, cultural and social benefits of life of the population. The direct relationship of the public sector with the dynamics of achievements of the innovative economy as a substantive basis for the efficient functioning of all spheres of social life, including cultural, anthropological, scholarly, and pragmatic factors, is proved. They correlate with the concept of social welfare based on the distribution of incomes, where the main problems are the fulfillment of demand for social justice. Furthermore, the meaningful load of the public sector in interaction with the state, municipal, private, mixed, and "third" sectors of the economy is revealed, and the distinction and specificity of each of them are shown as well. The peculiarity of the institutional model of the public sector is its manifestation through the social objectives of economic policy, rules and norms of modernization of Ukrainian society in the context of global and geopolitical challenges. The theoretical generalization of the logic of constructing an institutional model of the public sector of the economy in correlation with the possibilities of its practical implementation in the economic policy of the state has allowed identifying a number of universal rules for incorporating modern mechanisms of influence on innovation processes and social policy in Ukraine. Moreover, we have proved that the public sector should act both as a condition for economic growth and as a guarantee of sustained economic dynamics, a means of formation and development of a socially oriented economic system. The public sector with the government is substantiated to be considered as a set of macro systems operating on a countrywide scale, becoming an institutionalized part of the national economy. Public finances play a key role among the components of the public sector as an important tool for assessing the extent of its impact on the most important macroeconomic and microeconomic indicators. The main characteristics of the category of public good, wherein the public sector activity is aimed at its achievement, are analyzed.
