Lietuvos vietinės valdžios subsektoriaus finansų regioninė diferenciacija ; Regional disparities in Lithuania: local government funding

Abstract

Fiscal decentralization creates preconditions for a more rapid socio-economic regional development; however, it may lead to financial difficulties in regions. Some municipalities are unable to collect revenues, are lacking funds to finance their main activities and perform functions delegated by the state. Recently the issue of public sector budget management and administration has started causing troubles and become relevant. Problems related to the structure and functioning of local government budgets have not been sufficiently analyzed in economics literature. The role of local government is very important for the life of the state; local government funds make up the biggest part of the public sector funds. It has been noticed recently that local governments have been facing financial difficulties. Regional disparities became evident after Lithuania's accession to the EU because region centres are less attractive and competitive than the major cities, are raising less funds and attracting less investment. Insufficient funding of local governments results in poor urban, transport, community, etc. environment and infrastructure. Research into municipality budgets may give light to the causes of regional disparities. Research aim: to evaluate expenses, revenues and debts of local government budgets in 2002–2010. Data on local government budgets are analysed in the paper. The period of 2002-2010 was chosen because the main political and economic changes happened in Lithuania (accession to the EU, economic rise and decline) and fluctuations and general trends in local government budgets appeared. Local government expenditures, revenues (from taxes, non-taxes and grants) and debts per capita were compared. The dynamics of these financial indicators and the structure of revenues were analysed. Statistical analysis was performed, variation coefficients, the Williamson index and the arithmetic average were calculated. [.]