The Impact of Developmental Exependiture on the Competitiveness of Local Governments

Research background: Development policy in Poland is based on various strategic documents, and it utilizes both the national resources and the European funds. Managing development at the local level is an important element of this policy. Many facets of this management are of incessant interest to the theory and practice of public finance. One of undisputed findings is the relationship between development and increase in competitiveness. However there are no studies showing the relationship between the shape of local government expenditure policy and increase of competitiveness at the local level. Purpose of the article: The paper is focused on demonstrating the importance of specific groups of public expenditure implemented by local government units for development processes at the local level. The authors try to answer the question whether the implementation of certain local budget expenditure positively impacts the level of local government tax revenue, which determine the ability to provide public services, while creating a boost to the growth of competitiveness. Methodology/methods: On the basis of international consensus on the impact of individual factors on the competitiveness measured at the regional level, the authors propose the concept of public developmental expenditure and they adjust it to current standards of budget reporting. In turn, the indicator of tax revenue per capita was chosen to measure the achievement of the objectives of development policy at the local level. The study covers all major cities in Poland (poviat-cities). The authors calculate the volume of the developmental expenditure over the reference period in each city covered by the study as well as the average dynamics of tax revenue per capita. Regression analysis constitutes the essential part of the study. Findings: The observations that had been made, allowed to draw some conclusions regarding both the usefulness of proposed classification of developmental expenditure for the processes of planning, monitoring and evaluation of development strategies and the importance of developmental expenditure for the growth of competitiveness. The proper allocation of budgetary resources in developmental projects should lead in the long run to the growth of local economy and thus also to increase in local budget revenue.