PATTERN CLASSIFICATION ON SPECIFICS OF PUBLIC SECTOR INVESTMENTS AND BUDGETING PRINCIPLES

Lukáš Bernat; Radka Michlová; Helena Mitwallyová

doi:10.52950/ES.2023.12.1.002

Authors

Lukáš Bernat Vysoká škola Ekonomická v Praze, Národohospodářská fakulta, Katedra Filosofie, Czech Republic Author
Radka Michlová Vysoká škola Ekonomická v Praze, Národohospodářská fakulta, Katedra regionálních studií, Czech Republic Author
Helena Mitwallyová Vysoká škola Ekonomická v Praze, Národohospodářská fakulta, Katedra práva, Czech Republic Author

DOI:

https://doi.org/10.52950/ES.2023.12.1.002

Keywords:

FAMA, Classification, Clustering municipalities, Investment, Budgeting, Debt

Abstract

The aim of the study is to find patterns in an exact, complete dataset containing the annual budgets of all municipal entities in the Czech Republic over the past 20 years. The focus of the analysis is on which resources could enable the development of and investment in municipal assets, especially real estate property. The Financial and Real Estate Analysis (FAMA) method was chosen, which provides comparable indicators to calculate debt service and other related features of performance at the municipal level. These indicators demonstrate whether municipal entities follow responsible budgeting principles and/or how they utilize their own resources. When comparing similar studies using the mentioned data and methodology, there is a gap between the temporal context of the data and the relationships among the chosen indicators. The reason for this obstacle is the difficulty of structuring the data as time series and properly analyzing them. The relevant indicator items are aggregated, so all the connections between them and other items are lost. Given the enormous amount of data, the study uses classification tools to uncover hidden patterns in how municipal budgeting develops over time without detailed knowledge about each case in the context of debt and assets. The study converts the time dimension into a static indicator of its dynamics and, using pure K-means classification, concludes that there are six different clusters that differ from each other in several indicators. Within the broader context of these clusters, we propose an overview of municipal budgeting strategies. In large cities, financing of investment is dominated by debt, while the remaining clusters differ significantly, usually with only a small impact of population size, which is one of the determinants of budget income and therefore an essential part of the budget.

Data:
Received: 13 Feb 2023
Revised: 3 Apr 2023
Accepted: 17 Apr 2023
Published: 1 May 2023