Priorities of Budget Expenditures of Latvian Municipalities in the Context of Improving the Local Economy

Abstract

The aim of this research is the identification of comparative priorities of budget expenditures of Latvian municipalities (either on transport infrastructure or production) in the context of improving the local economy. The scientific and practical significance of this study lies in the empirical evidence of current trends indicating the ‘transport-production’ economic restructuring of the territory of Latvia: strengthening economic (and demographic – in terms of population outflow) isolation of the south-eastern part of Latvia, the Latgale region, from the rest of its territory; the emergence of a compact block of ‘production’ self-governments (with a preference for supporting production to the development of transport infrastructure) with a stable population; expansion of the cluster located in the center of Latvia (in and around the metropolitan agglomeration) and consisting of the most economically active ‘transport’ self-governments with a growing population. Methods of the empirical analysis. The authors applied various methods of statistical analysis: frequency analysis, tests for normality and comparison of proportions of paired samples (to study the distribution of various states of the economy of Latvian municipalities), comparison of proportions of independent samples (to determine the statistical significance of differences in the comparative priority of budget expenditures in different groups of Latvian municipalities), correlation analysis (to study the interdependence of ‘transport’ / ‘production’ expenses of Latvian municipalities and the state of the economy of the corresponding territories), cluster analysis (to identify different typological groups of Latvian municipalities according to the studied parameters). Source of empirical information. The authors used empirical data from the Basic Budget Implementation Reports submitted by Latvian municipalities to the State Treasury in 2021 and 2022, taking into account the number of residents in the corresponding municipal territories (to calculate per capita indicators). The results of the empirical analysis show that the comparative priority in the budget expenditures of Latvian municipalities is determined not by the state of the local economy, but rather by the geographical (or geopolitical / geoeconomic) location of the municipal territory. As a result of this, Latvian municipalities are grouped into territorial clusters, reaping the benefits of the agglomeration effect stemming from the concentration of either transport infrastructure or production, with the latter being more pronounced in 2022.

Keywords

• production
• priorities of budget expenditures
• latvian municipalities
• local economy
• transport infrastructure
• statistical analysis