Fiscal Consolidations in Polish Local Governments in the Period 2008–2016: Course and Causes

Abstract

The article presents strategies of fiscal consolidations conducted in Poland in cities with powiat rights, and a study of causes behind the decision to conduct such fiscal consolidations. Local governments showing an improvement of their public finances have been distinguished; and based on that, a description of various methods of reduction of expenditures, deficit or debt in Polish local governments has been presented. An analysis of data shows the dominance of consolidations on the revenue side. The study has identified few cases of expenditure cuts, and they mostly included investments, public transport and housing expenditures. Besides the description of data concerning fiscal consolidations, the article also presents a multivariate probit regression model and logistic regression model estimated based on panel data aimed at studying the determinants of conducting financial consolidations in a given local government. The hypotheses that macroeconomic variables and the election cycle have a statistically significant effect on the decision to conduct consolidation have been positively verified; whereas the hypothesis that other political factors significantly affect the probability of improvement of the financial situation of a local government have been verified negatively.