THE EVALUATION OF IMPACT OF MUNICIPALITIES' FISCAL COMPETITIVENESS ON ECONOMIC GROWTH

Abstract

The competition between municipalities is problematic due to a common misconception that rivalry is impossible because documents regulating finances are the same across all local self-governments. In contrast, scientific research shows that the livability of one municipality can differ to another because of differences in their social-economic benefits. This distinction is not conditioned by geographic location or other special features of the municipality but rather by the amount of funds assigned and allocated to social and public welfare. This article aims to reveal the factors pertaining to the municipalities’ fiscal competitiveness that affect economic growth within the state. This has relevance as a reallocation of a municipality’s expenditure could provide new possibilities towards increasing future revenue of the municipality. For reaching the aim is examined by evaluating the effect of municipalities’ fiscal competitiveness on Lithuania’s economic growth using the volume and structure of expenditure in its municipalities. Results show that the major channels determining the fiscal competitiveness of a region are human resources, the business sector, and the institutional environment, and that these differ among municipalities.