Managing Rural Areas in the Context of the Growing Debt of Polish Local Government Units

Agnieszka Kozera,Łukasz Satoła,Aldona Standar

doi:10.3390/agriculture10090376

Agnieszka Kozera, Łukasz Satoła + Show 1 more

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https://doi.org/10.3390/agriculture10090376

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Abstract

Local development is a long-term process of economic transformation. To make it happen, expenditure must be incurred, especially including investments. At a local level, the financial burden involved in the transformation is mostly on local government units. Although a three-level administrative system is in place in Poland, bottom-level units (municipalities) are largely responsible for driving local development. Polish rural areas make up over 90% of the national territory, and rural municipalities alone are home to 11 million people, i.e., 30% of the total population. Poland’s accession to the European Union and the ability of local government units (LGUs) to use Union funds contributed to local development, in particular by making many rural municipalities a more attractive place to live and invest in. However, a rapid increase in debt levels was another consequence. Excessive indebtedness of LGUs threatens not only their stable operation and local development but also the stability of the whole public finance sector. The main purpose of this study was to assess the level of and differences in indebtedness of Polish rural municipalities, and to identify the key socioeconomic conditions of debt. The analysis period was 2007–2017. This article used the TOPSIS routine to develop a synthetic indicator of municipal debt levels. An ordered logit model was also employed to identify the key conditions behind municipal indebtedness in Polish rural areas. This study found that, in 2007–2009, most rural municipalities (over 50%) recorded extremely low or low levels of debt while only one-fifth were at high or extremely high levels. In turn, already in 2015–2017, more than one-third of all rural municipalities were at a high or extremely high level of debt. The study also allowed to validate the research hypothesis formulated in this paper, namely that “the key reason for the growing level and diversity of indebtedness of Polish rural municipalities is the investment activity of local authorities in seeking funds from the European Union”.

Highlights

IntroductionLocal development means a long-term process of positive, targeted changes affecting the economy
Local development means a long-term process of positive, targeted changes affecting the economy.Note that, in addition to attaining economic goals, development measures must address social and environmental objectives [1,2]
There are several reasons that justify the increase in public expenses, including in local government expenditure [52], which may be divided into four essential groups: economic, sociological, political and social factors [53]

Summary

Introduction

Local development means a long-term process of positive, targeted changes affecting the economy. In addition to attaining economic goals, development measures must address social and environmental objectives [1,2]. It consists of using the available regional resources to contribute to improvements in wellbeing and to equality goals [3]. To make it happen, the entity in charge of driving local development must incur investment expenditure. Authorities responsible for the creation of conditions that encourage local development include local government units

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