New method to support decision making process in the local economic development of Hungary

Abstract

This study provides a method that supports local governments' efforts to develop their economy with a set of instruments built on evidence-based decision making. The authors' first objective is to define the action space and opportunities by examining the relation between environmental factors and internal resources. To achieve this, an analytical tool was designed that discovers - with an indicator system - the network of internal factors of a settlement economy and the external environment affecting it. When studying local economic development, it is important to assess the local economy in situ and its interaction with its surroundings. The second objective is to discover and show the connection between the available tools and environmental factors, and thereby enable decision makers to take development actions based on evidence. The tools provide a quantified relationship between the possible actions and environmental factors made available by these actions. It is essential to determine which actions affect which environmental factors, and which factor they can help adjust. It is assumed that the development tools used by local governments are not equal in their effectiveness when interacting with the different environmental factors. The authors' third objective is to discover the relationship between the tools and internal resources, thereby ensuring a base for planning resources necessary for implementing economic development actions. According to their preliminary assumption, the relations between the available resources and local governmental tools are not of the same strength; therefore, it justifies their analysis. The next assumption is that areas affected by the same environmental factors can be devel oped to different extents with local governmental tools. However, it is also assumed that a settlement can be developed according to a predefined target by a systematic application of appropriately selected tools; thus, every area can be developed. Economic factors are related to each other; they constitute a living fabric. The authors' objective is to discover the hidden relations in a local economy. According to their assumption, understanding these relations allows indirect influence of economic factors that are more difficult to shape. The authors' final objective is to provide structured information for economic development actions.