The application of classical and positional TOPSIS methods to assessment financial self-sufficiency levels in local government units

Abstract

The aim of this study was to conduct a comparative analysis of the results provided by rank ordering of objects and identification of their development types using the TOPSIS (Technique for Order Preference by Similarity to an Ideal Solution) method in two approaches—classical and positional. The classical approach aiming at the construction of a synthetic measure of development is based on the classical standardisation of characteristics values and Euclidean distances of each object from model objects (the positive and negative ideals of development), while the positional approach applies standardisation of the Weber medians and median absolute deviation. The proposed approaches are presented based on an example concerning the construction of a synthetic measure and identification of types of financial self-sufficiency in rural communes of the Wielkopolska Province, Poland, in 2013. The study is based on statistical data supplied by the Central Statistical Office of Poland (Local Data Bank) and the Ministry of Finances (Indicators to assessment the financial situation of local government). Analyses showed that the application of the positional approach has led (in comparison to the classical approach) to such a value of the synthetic measure, which covered a greater part of the potential range of its variation and as a result—to a more accurate and more comprehensive identification of types of financial self-sufficiency in rural communes.