Relative Assessment of the Financial Situation of Households in Small Towns in Poland

Purpose: The research aimed to assess the financial situation of small-town households relative to those in larger cities Design/Methodology/Approach: The study drew on unpublished microdata from the Household Budget Surveys (HBS) conducted between 2015 and 2022 by the Central Statistical Office (CSO) in Warsaw, Poland. Representative samples included approximately 30,000 households each year. Urban households were categorized by the size of their residence area. The relative advantage of each class was computed for each dimension of the financial situation and then synthesized into a relative index for each analyzed year. Findings: The research revealed that, at the start of the study period in 2015, small-town households had relatively the worst financial situation. During the pre-pandemic years (2015-2019), a clear convergence emerged among urban households of different classes. Notably, the financial situation of small-town households experienced the most significant improvement. However, the outbreak of the pandemic in 2020 reversed this trend, causing a deterioration for households in small, medium, and large cities. In contrast, very large cities and metropolises saw a relative improvement. Throughout the pandemic years (2020-2022), changes in the financial situation of the analyzed household classes were minimal, with the most notable being the continued improvement for small-town households. PracticalImplications: Diagnosing the financial situation of households is crucial for assessing economic activity, crisis management, household economic development, and national economic growth. This study also highlights the developmental potential of small-town households. The improvement in their financial situation relative to other urban households indicates better living conditions in economic terms for small-town households. Additionally, it shows the impact of the pandemic and government protective measures on the financial situation across different size classes. The findings can assist local or central authorities and financial institutions in better managing urban development and maintaining economic stability, ensuring appropriate living conditions for city residents. Originality/Value: The added value of this research lies in using a relative synthetic index to assess the financial situation of urban households by city size classes. The index synthesized various dimensions of the financial situation for a selected class relative to all other classes combined. The paper also includes source code in the R environment for the relative synthetic index. Additionally, the research drew on large databases encompassing over 200,000 records.