Liabilities of local government units in Poland : identification and analysis of diversification factors

Abstract

PURPOSE: The article aims to identify the factors that influence the levels of debt in Polish local governments. Specifically, we look at the structure of local units' revenue and expenditure and try to determine which of the characteristics have a significant impact on debt levels.

DESIGN/METHODOLOGY/APPROACH: We divide our analysis into three types of municipalities, urban, rural, and urban-rural municipalities. We find that each of this type of municipality has different determinants of debt level.

FINDINGS: This article provides a solid recommendation for researchers and policy makers to carefully derive conclusions from analyses made on the total population of local units, as their heterogeneity may significantly impact the research results. Therefore, policy recommendations and actions should not be homogeneous across all types of local governments.

PRACTICAL IMPLICATIONS: The article identifies income factors of local budgets that are statistically significant and influence positively or negatively the size of the public debt of local government units. Practical aspect of the paper means that results can be used to manage local government units or assess their stability by external agencies.

ORIGINALITY/VALUE: The obtained results are in line with the previous research results and extend the knowledge in the stability and indebtedness of local government units. The study carried out allows to extend this knowledge and proves that the indebtedness of local government units is also affected by the structure of income of these units.