Relationship Between Fiscal Sustainability and Efficiency: Evidence from Large Cities in Poland

• Autorzy: Katarzyna Wojtowicz , Sabina Hodzic
• Języki publikacji: EN

Abstrakty

EN

Fiscal sustainability should be defined in the relation between public finances and sustainable economy. It requires a fiscal policy aimed not only at a fiscal balance, but also at the well-being of future generations, while taking the economic, social, environmental and institutional dimensions into account. The objective of this paper is to examine the relationship between fiscal sustainability and efficiency on the example of large cities in Poland in the period from 2008 to 2019. In order to obtain empirical results, a data envelopment analysis and panel data analysis were applied, and a fiscal sustainability index was constructed by means of a multidimensional approach. Based on a sample of 66 large cities in Poland, the results showed that there is a negative relationship between fiscal sustainability and efficiency. These results, however, relate to a specific period in the history of Polish cities when the local debt limits were tightened. The improvement in efficiency allowed local government units to allocate saved local expenditures to the partial repayment of previously incurred local debts. By doing so, Polish cities fulfilled tightened fiscal rules, but their service-level solvency decreased. (original abstract)

Słowa kluczowe

EN

Fiscal stability; Panel data; Data analysis; Local government

PL

Stabilność fiskalna; Dane panelowe; Analiza danych; Samorząd terytorialny

• Czasopismo: Economics & Sociology
• Rocznik: 2021
• Tom: 14
• Numer: nr 3
• Strony: 163--184

Twórcy

autor

Katarzyna Wojtowicz

• Maria Curie-Skłodowska University of Lublin,Faculty of Economics, Lublin, Poland

autor

Sabina Hodzic

• University of Rijeka, Opatija, Croatia

Bibliografia

• Afonso A., & Fernandes, S. (2008). Assessing and explaining the relative efficiency of local government. The Journal of Socio-Economics, 37(5), 1946-1979. https://doi.org/10.1016/j.socec.2007.03.007
• Afonso, A., & Scaglioni, C. (2005). Public Services Efficiency Provision in Italian Regions: a Non-Parametric Analysis (Working Paper No. 2). University of Lisbon, School of Economics and Management. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=670741
• Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29-51. https://doi.org/10.1016/0304-4076(94)01642-D
• Athanassopoulos, A. D., & Triantis, K. (1998). Assessing Aggregate Cost Efficiency and the Related Policy Implications for Greek Municipalities. INFOR: Information System and Operational Research 36(3), 66-83. https://doi.org/10.1080/03155986.1998.11732347
• Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some models for estimating technical and scale inefficiencies an data envelopment analysis. Management Science, 30(9), 1078-1092.
• Berne, R. (1992). The Relationships between Financial Reporting and the Measurement of Financial Condition. Governmental Accounting Standards Board of the Financial Accounting Foundation.
• Bird, R. (2006). Fiscal Flows, Fiscal Balance, and Fiscal Sustainability. In R. M. Bird & F.Vaillancourt (Eds.), Perspectives on Fiscal Federalism (pp. 81-97). World Bank.
• Bisogno, M., Cuadrado-Ballesteros, B., & García-Sánchez, I. M. (2017). Financial Sustainability in Local Governments: Definition, Measurement and Determinants. In M. Rodríguez Bolívar (Ed.), Financial Sustainability in Public Administration (pp. 57-83). Palgrave Macmillan.
• Bisogno. M., & Cuadrado-Ballesteros, B. (2018). Explaining the relation between efficiency and financial condition: empirical analysis on local governments. In M. Rodríguez Bolívar and M. Deseada López Subires (Eds.), Financial sustainability and intergenerational equity in local governments (pp. 149-178). IGI Global.
• Bogdanov, O., Jeremić, V., Jednak, S., & Čudanov, M. (2019). Scrutinizing the Smart City Index: a multivariate statistical approach. Zbornik radova Ekonomskog fakulteta u Rijeci časopis za ekonomsku teoriju i praksu, 37(2), 777-799. https://doi.org/10.18045/zbefri.2019.2.777
• Bury, A., & Bury, P. (2008). Local finance in Poland in view of the European Charter of Local Self-Government. Economics & Sociology, 1(1). https://doi:dx.doi.org/10.14254/2071-789X.2008/1-1/11
• Canadian Institute of Chartered Accountants (CICA). (1997). Indicators of Government Financial Condition. Toronto.
• Canadian Institute of Chartered Accountants (CICA). (2009). Public Sector Statements of Recommended Practice (SORP) Indicators of Financial Condition. Toronto.
• Carmeli, A. (2002). A Conceptual and Practical Framework of Measuring Performance of Local Authorities in Financial Terms: Analysing the Case of Israel. Local Government Studies, 28(1), 21-36. https://doi.org/10.1080/714004135
• Chapman, J. I. (2008). State and local fiscal sustainability: The challenges. Public Administration Review, 68(1), S115-S131. https://doi.org/10.1111/j.1540-6210.2008.00983.x
• Charnes, A., Cooper, W, W., & Rhodes, E. L. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429-444. https://doi.org/10.1016/0377-2217(78)90138-8
• Cuadrado-Ballesteros, B., & Bisogno, M. (2018). Efficiency as a determinant of financial condition: an assessment of Italian and Spanish local governments. International Public Management Journal, 22(5), 743-774. https://doi.org/10.1080/10967494.2018.1476426
• De Borger, L. E., & Naper, L. R. (2006). Efficiency Potential and Efficiency Variation on Norwegian Lower Secondary Schools. FinanzArchiv: Public Finance Analysis 62(2), 221-249. https://10.1628/001522106X120677
• Dollery, B., & Grant, B. (2011). Financial Sustainability and Financial Viability in Australian Local Governments. Public Finance and Management, 11(1), 28-47.
• Drew, J., Kortt, M. A., & Dollery, B. (2015). What Determines Efficiency in Local Government? A DEA Analysis of NSW Local Government. Economic Papers, 34(4), 243-256. https://doi.org/10.1111/1759-3441.12118
• Drew, J., Dollery, B., & Kortt, M. A. (2016). Peas in a Pod: Are Efficient Municipalities also Financially Sustainable?. Australian Accounting Review, 26(2), 122-131. https://doi.org/10.1111/auar.12098
• Dyson, R., Allen, R., Camanho, A., Podinovski, V., Sarrico, C., & Shale, E. (2001). Pitfalls and protocols in DEA. European Journal of Operational Research, 132(2), 245-259.
• Financial Sustainability Review Board (2005). Rising to the Challenge. South Australian Local Government Association.
• Fineberg, A. (2013). Promoting sustainable local economic development for all areas: looking forward or looking backward?. Local Economy, 28(7-8), 914-920.
• Groves, S. M., Godsey, W. M., & Shulman, M. A. (1981). Financial Indicators for LocalGovernment. Public Budgeting & Finance, 1(2), 5-19. https://doi.org/10.1111/1540-5850.00511
• Hendrick, R. (2004). Assessing and Measuring the Fiscal Health of Local Government: Focus on Chicago Suburban Municipalities. Urban Affairs Review, 40(1), 78-114. https://doi.org/10.1177/1078087404268076
• International Public Sector Accounting Standard Board (IPSASB). (2011). Recommended Practice Guideline, Reporting on the Long-Term Sustainability of a Public Sector Entityʼs Finances. International Public Sector Accounting Standard Board.
• International Public Sector Accounting Standards Board (IPSASB). (2013). Reporting on the Long-term Sustainability of an Entity's Finances. International Public Sector Accounting Standard Board.
• Jacob, B., & Hendrick, R. (2013). Assessing the Financial Condition of Local Governments. In W. H. Levine, J. B. Justice and E. A. Scorsone (Eds.), Handbook of Local Government Fiscal Health (pp. 11-41) Jones and Bartlett Learning.
• Hodžić, S., & Muharemović, A. (2019). Fiscal Decentralization and Efficiency of Regional Government in Croatia: A Data Envelopment Analysis. Lex Localis - Journal of Local Self-Government, 17(3), 453-470. https://doi.org/10.4335/17.3.453-470(2019)
• Honadle, B. W., Cigler, B., & Costa, J. M. (2004). Fiscal Health for Local Governments. Academic Press.
• Kloha, P., Weissert, C. S., & Kleine, R. (2005). Developing and Testing a Composite Model to Predict Local Fiscal Distress. Public Administration Review, 65(3), 313-232. https://doi.org/10.1111/j.1540-6210.2005.00456.x
• Kuhlmann, S., & Bouckaert, G. (Eds.). (2016). Local public sector reforms in times of crisis. Palgrave Macmillan. https://doi.org/10.1057/978-1-137-52548-2
• Levine, H., Rubin, I. S., & Wolohojian, G. G. (Eds.). (1981). The Politics of Retrenchment: How Local Governments Manage Fiscal Stress. Sage Publications.
• Levine, H., Justice, J. B., & Scorsone, E. A. (Eds.). (2013). Handbook of Local Government Fiscal Health. Jones and Bartlett Learning.
• Loikkanen, H., & Susiluoto, I. (2005). Cost Efficiency of Finnish Municipalities in Basic Service Provision 1994-2002 (Discussion Paper No. 96). Helsinki Center of Economic Research.
• Manasan, R. G. (2020). Fiscal Sustainability, Equity, and Allocative Efficiency in the Light of the 2019 Supreme Court Ruling on the LGUs' Share in National Taxes (Discussion Papers DP 2020-18). Philippine Institute for Development Studies.
• Nardo, M., Saisana, M., Saltelli, A., Tarantola, S., Hoffman, A., & Giovannini, E. (Eds.). (2005). Handbook on Constructing Composite Indicators: Methodology and User Guide.OECD Publishing.
• Navarro-Galera, A., Rodríguez-Bolívar, M. P., Alcaide-Munoz, L., & Lόpez-Subires, M. D., (2016). Measuring the financial sustainability and its influential factors in local governments. Applied Economics, 48(41), 3961-3975. https://doi.org/10.1080/00036846.2016.1148260
• Nollenberger, K., Groves, M. S., & Valente, M. (Eds.). (2003). Evaluating Financial Condition: A Handbook for Local Government. International City/County Management Association.
• Prior, D., Martín-Pinillos-Castellanos, I., Pérez-López, G., & Zafra-Gómez., J. L. (2019). Cost efficiency and financial situation of local governments in the Canary Isles during the recession. Revista de Contabilidad-Spanish Accounting Review, 22(2), 129-144. https://doi.org/10.6018/rcsar.376091
• Rodríguez-Bolívar, M. P., Navarro-Galera, A., Alcaide-Muñoz L., & López-Subirés, M. D. (2016). Risk factors and drivers of financial sustainability in local government: An empirical study. Local Government Studies, 42(1), 29-51. https://doi.org/10.1080/03003930.2015.1061506
• Schick, A. (2005). Sustainable Budget Policy. OECD Journal on Budgeting, 5(1), 107-126.
• Sikora-Fernandez, D. (2018). Smarter cities in post-socialist country: Example of Poland. Cities 78, 52-59. https://doi:10.1016/J.CITIES.2018.03.011
• Skica, T., Leśniowska-Gontarz, M., & Miszczyńska, K. (2019). Measuring the efficiency of Polish municipalities - data envelopment analysis approach. South East European Journal of Economics and Business, 14(2), 54-66. https://doi.org/10.2478/jeb-2019-0013
• Stanković, J., Džunić, M., Džunić, Ž., & Marinković, S. (2017). A multi-criteria evaluation of the European citiesʼ smart performance: Economic, social and environmental aspects. Zbornik radova Ekonomskog fakulteta u Rijeci časopis za ekonomsku teoriju i praksu, 35(2), 519-550.
• Thuzar, M. (2011). Urbanization in Southeast Asia: Developing Smart Cities for the Future?. In Regional Outlook 2011/2012, 96-100.
• Wang, X., Dennis, L., & Tu, Y. S. J. (2007). Measuring Financial Condition: A Study of US states. Public Budgeting & Finance ,27(2), 1-21. https://doi.org/10.1111/j.1540-5850.2007.00872.x
• Wällstedt, N., Grossi, G., & Almqvist, R. (2014). Organisational solutions for financial sustainability. A comparative case study from the Swedish Municipalities. Journal of Public Budgeting, Accounting & Financial Management, 26(1), 181-218.
• Wόjtowicz, K. A. (2019). The significance of Selected Socio-economic Factors for the Achieving of Fiscal Sustainability of Local Government Units in Poland. Lex Localis-Journal of Local Self-Government, 17(3), 617-642. https://doi.org/10.4335/17.3.617-642(2019)
• Yoshida, M. (2020). Fiscal sustainability of local governments in Japan. Asian Economic Journal, 34(2), 127-162. https://doi.org/10.1111/asej.12210
• Zafra-Gómez, J. L., López-Hernandez, A. M., & Hernández-Bastida, A. (2009a). Evaluating Financial Performance in Local Government: Maximizing the Benchmarking Value. International Review of Administrative Sciences, 75(1), 151-167. https://doi.org/10.6018/rcsar.376091
• Zafra-Gómez, J. L., López-Hernandez, A. M., & Hernández-Bastida, A. (2009b). Developing a Model to Measure Financial Condition in Local Government: Evaluating Service Quality and Minimizing the Effects of the Socioeconomic Environment: An Application to Spanish Municipalities. American Review of Public Administration, 39(4), 425-449. https://doi.org/10.1177/0275074008320710

Identyfikatory

DOI

10.14254/2071-789X.2021/14-3/9