Multidimensional Assessment of Polish Farm Household Financial Security by TOPSIS and Generalised Distance Measure

Abstract

Purpose: Financial security is a multidimensional term, with its level is depending, in subjective and objective terms, on many socio-demographic conditions. This article aims to assess Polish farm households’ financial security by means of a combined measure. Design/Methodology/Approach: The study was based on non-identified (raw) individual data originating from the Social Diagnosis Study conducted by the Social Monitoring Council in 2015. Due to non-metric nature of many simple criteria, in order to construct a combined measure of the farm - household financial security level, a Generalised Distance Measure (GDM) was used along with TOPSIS. Findings: Farm households are classified by types and profiles that have been developed of households featuring the highest and the lowest level of financial security. The study revealed significant differences among farm households in terms of their financial security level in both, subjective and objective terms. Practical Implications: This research is interesting for methodological reasons, since a single methodology for studying the level of financial security and identifying its determinants has yet to be developed. The problem is not just the multidimensional character of the phenomenon and the lack of an unequivocally defined set of variables characterising it. The choice of appropriate statistical methods is also an important consideration, e.g., for constructing a single synthetic financial security indicator and dedicated software. Originality/value: To the authors’ knowledge, no one has hitherto made any studies concerning the multi-aspect assessment of the household financial security level based on a combined feature, the construction of which takes account of objective criteria (quantified on strong measurement scales) as well as subjective ones (measured on weak scales).