Local governments’ fiscal policy as a factor of urban development – evidence from Poland

The paper explores the issue of urban development in the context of fiscal crisis. A model of municipal governance is introduced, explaining how social agents’ individual strategies shape the accumulation of debt by local governments. Empirical investigation, in a sample of big Polish cities, is presented as an illustration of the model. The conclusion is twofold. Firstly, the extent of municipal debt should definitely be considered as an indicator of quality in municipal governance, and, that real accumulation of municipal debt is justifiable only on the short run, and when the given city grows significantly in demographic terms. Secondly, the old institutionalism is a good theoretical framework for studying municipal, fiscal policy, as it emphasises the importance of habits and subjective consistency in individual strategies.