The demographic and economic determinants of financial sustainability: An analysis of Italian local governments

Abstract

The aim of this study was to analyze the influence of demographic and economic variables on financial sustainability in Italian local governments (ILGs). Many international organizations have highlighted the importance of pursuing financial sustainability, and identifying what the factors impacting financial sustainability are, allowing to manage risk and opportunities as well as to support the decision-making process better. A total of 104 ILGs with more than 60,000 inhabitants were investigated for the year 2018. The adjusted income statements served as the dependent variable of a regression model for testing several demographic and economic variables. The results showed that demographic factors did not influence financial sustainability while, regarding the economic variables, there was a negative influence of financial autonomy and positive influence of the level of indebtedness. These values indicate a pathological scenario where local governments pursue short-term strategies that will impact future generations.