Solvency and Debt of Rural Communes vs. Their Residents’ Standards of Living: A Polish Case Study

Abstract

The purpose of this paper is to present the multidimensional dependencies between the budgetary solvency and debt of Polish rural communes on one side, and the residents’ standards of living on the other. Local government units’ budgetary solvency and debt (one of the key components of their financial condition) are important determinants of their efficient functioning oriented at addressing the needs of local communities as much as possible. The literature on the subject reveals a cognitive gap in the research into the standards of living and ways of driving social well-being, which is manifested in the dearth of empirical studies on how the components of local governments’ financial standing impact residents’ standards of living. Due to the multifaceted nature of the categories under consideration, a canonical analysis procedure was carried out to identify the linkages between them, and three statistically significant canonical roots were identified. This study demonstrates that if the values of variables relating to budgetary solvency and the debt levels of Polish rural municipalities (communes) are known, they have the potential to explain over 29% of the variance in the set related to the residents’ living standards. Hence, the components of local governments’ financial conditions are important, yet not the sole determinants of the population’s standards of living. The findings from such analyses could be used indirectly, e.g., by local authorities in the context of creating their development strategies and selecting measures designed to transform the socioeconomic structure of territorial units in accordance with what their residents need.