DOES LONGTERM GROWTH OF CROATIAN ECONOMY DEPEND ON DEMOGRAPHY OR PRODUCTIVITY AFTER ALL?

Cilj ovog rada je izrada dugoročnih projekcija gospodarskih kretanja u Republici Hrvatskoj za razdoblje do 2050. godine. Dugoročne projekcije kretanja gospodarstva korisne su radi pravovremenog uočavanja ograničenja i potencijalnih izazova u budućem razdoblju vezanih uz različita područja: demografske promjene, fiskalnu održivost, zaštitu okoliša i mnoge druge aspekte. Izrada projekcija temelji se na Cobb-Douglasovoj tipu funkcije proizvodnje koja u svojim dugoročnim projekcijama koristi Europska komisija za sve zemlje članice. Dugoročna kretanja gospodarstva proizlaze iz demografskih projekcija, te upotrebe proizvodnih faktora, rada i kapitala. No, najveća nepoznanica ostaje kretanje proizvodnosti nekog društva u dugom roku. Rezultati istraživanja ukazuju na potrebu značajnog podizanja efikasnosti investicija i ukupne proizvodnosti proizvodnih faktora, kao i povećanje stopa aktivnosti stanovništva na tržištu rada. Na taj način se, u određenoj mjeri, mogu ublažiti negativna demografska kretanja i očekivano smanjenje broja stanovnika u radnoj dobi u budućem razdoblju. Izrada dugoročnih projekcija uvijek je povezana s visokom razinom neizvjesnosti o kretanju brojnih varijabli u budućem razdoblju što utječe na rezultate projekcije. Prezentiranim rezultatima i zaključcima u ovom radu upotpunjena su relativno oskudna istraživanja o analiziranoj problematici u Republici Hrvatskoj. Prikazani alternativni scenariji rasta razine gospodarske aktivnosti, trebaju poslužiti kao podloga za izradu različitih brojnih strateških dokumenata koji definiraju srednjoročne i dugoročne politike, poput energetske, regionalne, industrijske, demografske, zdravstvene, zaštite okoliša i slično. Rezultati istraživanja ukazuju da će prosječna stopa gospodarskog rasta u razdoblju do 2050. godina u Republici Hrvatskoj iznositi od 1,1 posto (bazni scenarij) do najviše 1,9 posto, ovisno o pretpostavkama. Stopa rasta potencijalnog BDP-a više ovisi o kretanju faktorske proizvodnosti, nego o demografskim kretanjima.The aim of this paper is to provide long-term projections of economic growth in the Republic of Croatia for the period up to 2050. Long-term projections of the economic growth are useful tool for identification of potential growth limitations related to different socioeconomic issues: demography, fiscal sustainability, environmental protection and many other aspects. The projections are based on Cobb-Douglas’s type of production function in order to be comparable to European Commission long-term projections for all member states. Expected long-term economic developments are based on demographic projections, as well as projections of capital deepening and total factor productivity growth. Long-term projections are faced to many uncertainties, especially path of total factor productivity path in the long run. Research results point to the increase of investment efficiency and total factor productivity growth as the most important drivers for long-term growth. In addition, labor market participation rate seems to be of utmost importance. This could, at least to some extent, mitigate negative demographic trends and further working-age population shrinking. Long-term projections are usually faced to a high level of uncertainty. Many variables are exposed to future changes in alternative scenarios. The results and conclusions presented in this paper fill the gap in domestic literature on the long term potential growth in the Republic of Croatia. The alternative scenarios of growth could serve as a basis for a number of strategic documents dealing with energy, regional policy, industry, demographic, health, and environmental protection issues. The research results suggest that the average annual economic growth rate in Croatia up to 2050 in Croatia would be in range of 1.1 percent (base scenario) up to 1.9 percent, depending on the growth rate of total factor productivity. Potential GDP growth rate is more dependent on factor productivity rather than demography

MANUFACTURING PRODUCTS IN CROATIA: TECHNOLOGY, SUPPLY AND DEMAND

U radu autor analizira tehnološke karakteristike prerađivačke industrije u Hrvatskoj. Tehnološka se struktura mijenja na nepovoljan način, i to tako da se povećava udio proizvodnje proizvoda niže tehnološke osnovice, a smanjuje se udio proizvoda više tehnološke osnovice. Takve strukturne promjene ukazuju na gubitak konkurentnosti i sposobnosti proizvodnje proizvoda s višom dodanom vrijednošću. Osnovna je hipoteza rada da Hrvatska tehnološki zaostaje i da se širi jaz između tehnološke strukture domaće ponude i domaće potražnje. Dodatna je hipoteza da struktura osobne potrošnje i investicija djeluje prociklično na prihode javnih financija zbog širenja tehnološkoga jaza između domaće ponude i potražnje. Širi se jaz između domaće ponude niske tehnološke razine i domaće potražnje za potrošačkim i investicijskim dobrima visoke tehnološke razine. Hrvatskoj prerađivačkoj industriji potrebna je tehnološka obnova da bi se smanjio jaz između potražnje i ponude proizvoda više razine tehnološke složenosti. Dalje povećanje domaće potražnje utjecat će na pogoršanje neravnoteže u međunarodnoj razmjeni. Hrvatska je prosječno izloženija međunarodnoj konkurenciji na domaćem tržištu od novih zemalja članica EU. Ukupan udio uvoza u domaćoj ponudi proizvoda prerađivačke industrije za Hrvatsku iznosio je 58,6%. Postoji značajan prostor za dodatno osvajanje domaćega tržišta za proizvode niske tehnološke razine. Hrvatski su proizvođači manje orijentirani na međunarodno tržište nego što su to nove članice. Na višu razinu koncentracije na tržištu i na nedovoljnu konkurenciju u hrvatskoj prerađivačkoj industriji upućuju HHI indeks i pokazatelj udjela velikih poduzetnika u ukupnom outputu.The purpose of this paper was to explore distinguishing features of Croatian manufacturing industry. The share of low technology industries is rising, and overall technology structure exhibits negative trends. Such changes point to the loss of competitive edge and diminishing ability to produce high value added products. The main hypothesis is that the technological gap between domestic supply and demand is widening, especially in the area of sophisticated consumer goods and investment goods. In addition to that, the structure of personal consumption and investment is limiting antirecessionary nature of fiscal policy because of technological gap widening. There is a clear need for technological upgrading in order to reduce the gap. Otherwise, the GDP growth in near future will exacerbate prevailing imbalances in international trade. Croatia is, on average, more exposed to international competition on domestic market in comparison to NMS. Total share of imports in domestic demand for manufacturing products in Croatia has been 58,6%. There is additional room for domestic producers to takeover additional share of domestic market in the area of low-technology products. HHI index of market concentration, as well as a share of large companies in total turnover, point to the low level of market competition among domestic producers

Maastricht Criteria and the Inclusion of Underground Economy - the Case of Croatia

European Union has introduced an explicit obligation for all member states that the official GDP data need to include the estimation of the underground economy, resulting from statistical or economic reasons. For this purpose, the so-called Eurostat Exhaustiveness programme has been developed for the group of candidate countries, ten of which have become full members as of the 1st of May 2004. In line with the results of this programme, the new EU members include the correction for the value of the underground economy into their official GDP figure. With the inclusion of underground economy, the consequent value of Croatian GDP per capita, measured according to the purchasing power parity, reduces the gap in comparison to the EU-25. Furthermore, the proportion of total expenditures in GDP of the general government sector is reduced as well, which places Croatia below the NMS-8 country average. In terms of the Maastricht convergence criteria, the underground economy inclusion procedure does not affect the fact that the criteria are not met. The inclusion of the underground economy influences two indicators: proportion of the government sector deficit in GDP and the proportion of the public debt in GDP. The inclusion of the underground economy does not influence on fulfilling the criteria concerning the government sector deficit. The criteria concerning the size of public debt are fulfilled by Croatia even without the inclusion of the underground economy. Inflation criteria and the size of long-term interest rates criteria are not directly linked to the GDP value

AGRICULTURAL LAND IN THE NEW EU MEMBER STATES AND CROATIA: PRICES, AFFORDABILITIES AND CONVERGENCE POTENTIAL

U ovome se članku analiziraju trendovi kretanja cijena poljoprivrednoga zemljišta u Hrvatskoj i u novim zemljama članicama Europske Unije. Uz cijene poljoprivrednoga zemljišta, računa se i analizira kretanje indeksa priuštivosti poljoprivrednoga zemljišta. Budući da navedene ekonomije prolaze kroz proces konvergencije, cijene i indeksi priuštivosti za Hrvatsku i za nove zemlje članice uspoređuju se sa starim zemljama članicama Europske Unije. Na osnovi te analize dolazi se do zaključka da su cijene poljoprivrednoga zemljišta u Hrvatskoj i u novim zemljama članicama višestruko niže u usporedbi sa starim zemljama članicama Europske Unije. No, zato što je u tijeku posljednjih desetak godina u Hrvatskoj i u novim zemljama članicama zabilježeno iznimno visoko povećanje cijena poljoprivrednoga zemljišta, priuštivost istog za ruralno stanovništvo postaje sve veći problem. Regresijska analiza determinanti cijena poljoprivrednoga zemljišta pokazuje da proizvodnost poljoprivredne proizvodnje i poljoprivredni dohodak najbolje objašnjavaju razinu cijena poljoprivrednog zemljišta.In this paper we analyze the developments in the agricultural land prices in Croatia and the new member states of European Union. Besides agricultural land prices, the affordability index of agricultural land is also calculated and discussed. Due to the fact that the observed economies are undergoing convergence process, their agriculture land prices and affordability indices are compared to old member stated of European Union. According to the analysis, one can conclude that agriculture land prices in Croatia and the new EU member states are several times lower when compared to the old EU member states. However, due to the rapid growth of the agricultural prices, the affordability of the agricultural land in Croatia and the new EU member states has become an issue for the rural population. The regression analysis of the agricultural land prices determinants suggests that the productivity of agricultural production and agricultural income explain best the level of the agricultural prices

QUARTERLY GDP ESTIMATE OF THE REPUBLIC OF CROATIA FROM THE FIRST QUARTER OF 1994 TO THE FOURTH QUARTER OF 1996 - EXPENDITURE APPROACH

U ovom radu autori su prikazali metodološke osnove za obračun kategorija bruto domaćeg proizvoda prema rashodovnom pristupu u skladu s međunarodnim preporukama prikazanima u SNA 1993. i ESA 1995. Također je prikazan i metodološki pristup kojim se pri obračunu godišnjeg i tromjesečnog BDP koristi Državni zavod za statistiku RH i kompatibilnost teoretski preporučene i empirijski primijenjene metode obračuna, i to za razdoblje 1994.-1999. Postojanje takve serije uveliko obogaćuje oskudne statističke izvore u Republici Hrvatskoj i pruža mogućnost za bolju analizu gospodarske stvarnosti i za modeliranje ekonomskih pojava.The paper shows methodological bases for accounting of gross domestic product categories according to expenditure approach harmonized with international references shown in SNA 1993 and ESA 1995. It is also shown methodological approach used in annual and quarterly GDP accounting by the State Bureau of Statistics of the Republic of Croatia and compatibility of theoretically suggested and empirically applied accounting method.The State Bureau of Statistics controls quarterly gross domestic product accounting according to expenditure approach for the period 1997-2000 and annual data are available for the period 1994-1998. The purpose of this paper is development estimate of quarterly gross domestic product according to main components of aggregate demand for the period 1994-1999. The existence of such series greatly enriches inadequate statistical sources in the Republic of Croatia and offers the possibility for better analysis of economic reality and modelling of economic occurences. The applied method for coordination of of ficialannual and estimated quarterly data is the Bassie method. The period before 1997 is characterized by inadequacy of availability and quality of data sources. These problems determine in advance quality and received development estimates of quarterly GDP. Weconsider that credibilty of received series is sufficient and a number of observations after coordination of quarterly and annual data sufficient, to use these series in majority of statistical and econometric programmes

JE LI BDP PRIKLADAN POKAZATELJ ODRŽIVOG EKONOMSKOG RAZVITKA?

The System of National Accounts (SNA 1993, ESA 1995) as an internationally agreed framework for the compilation and presentation of economic data defines gross domestic product (GDP) as an overall indicator of economic growth. Accounting for the environment’s contribution to the economy and human welfare was considered extremely difficult, requiring the resolution of intractable methodological problems and the generation of a large amount of data. Besides environmental aspects, GDP also fails to fully explain differences in overall satisfaction of the citizens and perception of quality of life and well-being. One of the most ambitious efforts to reform the calculation of an indicator of economic welfare is presented in Daly and Cobb (1989). They propose a GDP substitute, the Index of Sustainable Economic Welfare (ISEW) which, apart from the conventional national accounts data includes environmental variables and income distribution indicators. In this paper we apply the ISEW methodology to the Croatian economy and construct the index of sustainable economic welfare for Croatia in the period 2000-2010. Index of Sustainable Economic Welfare constructed for Croatia has not recorded signifi cant differences in comparison to GDP trends. Until 2003, the ISEW index was below GDP and personal consumption. In period 2003-2006 ISEW recorded higher levels than GDP while in 2007 and 2008 both indices are moving in line. During the recession period, overall welfare has not decreased substantially because GDP drop is partially compensated by non-monetary activities with positive impact on household wellbeing.Sustav nacionalnih računa (SNA 1993, ESA 1995) predstavlja međunarodno usuglašen okvir za izradu i prikaz ekonomskih podataka, a kao temeljni pokazatelj ekonomskog razvitka i rasta koristi se bruto domaći proizvod (BDP). BDP prema svojoj definiciji ne obuhvaća ukupne učinke ekonomskih transakcija na okoliš i ne mjeri blagostanje pojedinaca budući bi konstrukcija takvog pokazatelja zahtijevala rješavanje složenih metodoloških problema i uključivanje brojnih dodatnih varijabli u obračun. BDP također ne objašnjava ukupne razlike u zadovoljstvu građana i njihovu percepciju o kvaliteti života i blagostanju. U ekonomskoj literaturi kao jedan od najambicioznijih prijedloga za izračun indikatora koji bi bio primarno vezan uz mjerenje blagostanja najčešće se spominje rad Daly i Cobb (1989). Oni su pored BDP-a osmislili konstrukciju indeksa ekonomskog blagostanja (ISEW), koji bi osim konvencionalnih pokazatelja vezanih uz nacionalne račune obuhvaćao i određeni skup indikatora vezanih uz stanje okoliša i raspodjelu dohotka. U ovom radu je primijenjena metodologija izračuna indeksa ekonomskog blagostanja za hrvatsko gospodarstvo u razdoblju 2000.-2010. Indeks izrađen prema toj metodologiji u analiziranom razdoblju nije zabilježio značajne razlike u trendovima u usporedbi s kretanjem BDP-a. Do 2003. godine indeks ekonomskog blagostanja pokazivao je niži rast od rasta BDP-a i osobne potrošnje. U razdoblju 2003.-2006. indeks ekonomskog blagostanja pokazivao je višu razinu od BDP-a, dok se tijekom 2007.-2008. oba indikatora kreću usklađeno. U recesijskom razdoblju, za razliku od BDP-a indeks ekonomskog blagostanja nije pokazao značajno smanjivanje budući je pad monetarnih transakcija bio djelomice kompenziran kretanjem nemonetarnih aktivnosti koje pozitivno doprinose blagostanju kućanstava

HOUSE PRICE DETERMINANTS IN THE REPUBLIC OF CROATIA AND POTENTIAL EFFECTS OF HOUSING MARKET LIBERALIZATION

U članku se analiziraju kretanja cijena nekretnina u odabranim zemljama članicama Europske Unije i u Hrvatskoj. Analizirano je razdoblje od godine 2000. do 2006., i pritom se ocjenjuje koliki je učinak na cijene nekretnina imalo pridruživanje novih zemalja članica Europskoj Uniji. Rezultati analize ukazuju na to da su nekretnine u Hrvatskoj i u Sloveniji u prosjeku skuplje od ostalih zemlja u tranziciji, a o utjecaju pridruživanja na kretanje cijena nekretnina ne može se donijeti jednoznačan zakljuak. Zatim se provodi Johansen kointegracijska metoda i ocjenjuje se model korekcije odstupanja da bi se utvrdile kratkoročne i dugoročne determinante cijena nekretnina u Hrvatskoj. Pokazano je da je dohodovna elastičnost cijena nekretnina u dugome roku iznimno visoka i gotovo je tri puta veća od elastičnosti cijena nekretnina u odnosu na ponudu novih nekretnina. Cijene nekretnina u dugome roku reagiraju i na inflaciju i na promjene kamatnih stopa. U kratkome roku na cijene nekretnina najviše utječu krediti stanovništvu, dinamika sklapanja brakova i inflacija. Cijene nekretnina u Hrvatskoj mogle bi se povećati ako pridruživanje Europskoj Uniji dovede do povećanja raspoloživog dohotka stanovništva ili ako zbog pridruživanja ekonomski subjekti u Hrvatskoj formiraju pozitivna očekivanja o budućem dohotku.The paper analyses house price developments during 2000-2006 period in the selected EU member states and Croatia. The analysis assesses the effect of EU joining on house prices in new member states. The results indicate that housing in Croatia and Slovenia is on average more expansive when compared with the rest of the new member states, while the effect of joining on house prices is ambiguous. Johansen cointegration method and error correction method is estimated in order to determine long- and short-run elasticities of house prices in Croatia. The results suggest that long-run income elasticity of house prices is quite high – three times higher than the supply side elasticity. In the long run house prices also respond to changes in infl ation and interest rates. In the short run credits to households, demographic developments and infl ation affect house prices the most. If Croatian joining the Union causes higher disposable income or positive expectations of future income, house prices in Croatia might rise as a consequence

GROWTH, INTERNATIONAL TRADE AND OPENNESS OF ECONOMY

Pregled empirijskih rezultata studija o međuovisnosti međunarodne trgovine, brzine gospodarskog rasta i otvorenosti gospodarstva ukazuje da, neovisno o korištenim indikatorima otvorenosti gospodarstva i metodološkom pristupu, u većini slučajeva postoji uska korelacija između brzine gospodarstva i metodološkom pristupu, u većini slučajeva postoji uska korelacija između brzine gospodarskoga rasta i stupnja otvorenosti gospodarstva. Autori posebno naglašavaju da i svi parametri ekonomske politike moraju biti postavljeni takoda vode ostvarenju toga cilja, a ne da budu kontradiktorni.A survey of empirical results of studies on interdependence of international trade, economic growth rate and openess of economy suggests that in most cases, independently upon used indicators of openness of economy and methodological approach, exists close correlation between economic growth rate and level of openness of economy. This is empirically established fact, but researchers are still faced with the problem of establishing exact mechanisms by which the process of faster openness of economy and more considerable integrational division of labor influences faster economic growth. Majority of researchers points out the correlation of phenomenon of openness and transfer of technology and knowledge, thus the conclusion is that beneficial effects of openness of economy are received through technology and knowledge transfer, what secures quality improvement of domestic technological structure. That is an usual scenario in “normal” circumstances. But the cases of particular unsuccessful openness in Latin-American countries testify that in certain circumstances, in spite of openness of country and due to economic policy, it does not occur technology and knowledge transfer, but only extremely high balance of payments deficit which soon threatens the whole economic program. In other words the scenario of existence of beneficial effects of fast openness towards world and the use of allbeneficions through growing productivity, has real prospects only if all other parameters of economic policy are adjusted in a way that they aspire to realization of the same goal. However contradictions can appear, thus there are always researchers who conclude that fast openness towards the world itself is not sufficiently explored, it is dangerous and similar, and they are trying to find out many arguments which will contribute to infant industry scenario. It simultaneously follows from this fact the main attitude concerning possible doubts about growth liberalization and necessity of domestic industry protection in the Republic of Croatia. More comprehensive liberalization and integration into world trade capital and goods flows is not only necessity for a small country like Croatia, but also a process which already in a short term, and especially in a long one, brings to country huge profits with growing productivity. It should be repeated that all other parameters of economic policy should not be contradictory, but they must be established in such a way that they lead to realization of this goal. Especially mentioned should be here fiscal policy, monetary policy and wage policy, and entire economic and institutionally legal frame in general, which must aspire to promotion of transparency and efficiency on the whole. Experience confirms that in most cases, the arguments of domestic industry protection which were so frequent in past, and which appear nowadays in transitional countries due to the problem in there structuring process of economy, are the wrong way of deliberation of the way of integration into international goods and capital trends. Here should not be confused the concepts of protection of domestic industry and active industrial policy which each particular country conducts in a less or more explicit way, just because of alleviation and acceleration of technology and knowledge transfer from abroad, as well as production of the same at home. Perhaps it is not needless to remember the old truth in new environment like the transitional one