RELATIONSHIP BETWEEN FISCAL SUSTAINABILITY AND EFFICIENCY: EVIDENCE FROM LARGE CITIES IN POLAND
RELATIONSHIP BETWEEN FISCAL SUSTAINABILITY AND EFFICIENCY: EVIDENCE FROM LARGE CITIES IN POLAND

Summary/Abstract: Fiscal sustainability should be defined in therelation between public finances and sustainable economy.It requires a fiscal policy aimed not only at a fiscal balance,but also at the well-being of future generations, whiletaking the economic, social, environmental andinstitutional dimensions into account. The objective of thispaper is to examine the relationship between fiscalsustainability and efficiency on the example of large citiesin Poland in the period from 2008 to 2019. In order toobtain empirical results, a data envelopment analysis andpanel data analysis were applied, and a fiscal sustainabilityindex was constructed by means of a multidimensionalapproach. Based on a sample of 66 large cities in Poland,the results showed that there is a negative relationshipbetween fiscal sustainability and efficiency. These results,however, relate to a specific period in the history of Polishcities when the local debt limits were tightened. Theimprovement in efficiency allowed local government unitsto allocate saved local expenditures to the partialrepayment of previously incurred local debts. By doing so,Polish cities fulfilled tightened fiscal rules, but theirservice-level solvency decreased.

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