Intergovernmental Fiscal Relations - Potentials and Limitations for Financing of Local Development in Croatia

The major goal of this paper is to give an overview on the most important issues regarding intergovernmental fiscal relations and regional inequalities in Croatia. The first section will give a general background for analysis of intergovernmental fiscal relations. In order to achieve this, the present model of financing of the local and regional self-government units, the number and size of local and regional governments and distribution of functions and revenue sources among levels of government in Croatia will be presented. The second section will elaborate regional inequalities in Croatia measured by several indicators. The aim is to find out degree of correlation among intergovernmental finance system, especially the current grant and equalization system, and regional inequalities in Croatia. The paper will conclude with a summary of the strengths and weaknesses of the overall intergovernmental fiscal relations and regional inequalities. This last section will offer several recommendations aiming at the improvement of intergovernmental finance and reduction of regional inequalities in Croatia.

The Challenge of Building Proper Urban Indicator System: A Proposal for Croatian Cities

In this paper, urban indicator system is investigated in the context of urban policy processes. Indicators are seen as a tool to enhance urban management and special attention is given to their role in providing assistance in monitoring municipal development and performance. The paper will present desirable features of useful indicators from the city perspective, as well as framework to include these indicators in urban policy and management successfully. Formulation of proper indicator system requires a good understanding of the utilization, diffusion and dissemination of information in policy processes, so the paper will consider basic constraints related to these preconditions such as existing knowledge gaps within the indicator developer community vs. their theoretical limitations, communication concerns, human and technical capacities, policy issues etc. This paper will also elaborate modest Croatian experience in developing urban indicator system and lessons learned will be used as guidelines in making illustrative proposal for Croatian cities. In addition, this paper will try to define particular environmental, economic and governance variables/indices that should be adopted as urban indicators, taking in account Croatian specificities. We conclude this paper by addressing future challenges related to integration of urban indicator system within urban policy in Croatia.

Spatial impact of entrepreneurial zones: firm, city, and inter city evidence

We investigate the impact of a decade-long large public entrepreneurial infrastructure investment programme in an emerging European economy. Using a unique dataset, we examine the short-run firm, city and inter-city effects of entrepreneurial zones (EZs). EZs have a positive impact on business investment, sales and especially export revenues of firms located within them. Positive economic effects of EZs are limited on host and neighbouring towns and cities, decrease with distance and eventually become negative. This points to the localised nature of EZs effects and their potential for spatial redistribution and clustering of economic activity

Performance Measurement at the Sub-national Government Level in Croatia

This paper analyzes the role of performance measurement at the sub-national government level in Croatia as one of the crucial factors that lead to the improvement of implementation of local and regional policies. The analysis is based on the Public Expenditure and Financial Accountability Public Financial Management (PEFA PFM) Performance Measurement Framework. Three performance indicators are used for measuring the credibility of the sub-national budget. The first performance indicator measures the differences between aggregate expenditure outturns and the original approved budget at the sub-national government level in Croatia. The second performance indicator is used to examine the difference between the composition of expenditure outturn and the original approved budget at the sub-national government level in Croatia. The third indicator measures the deviation of aggregate revenue outturn from the original approved budget at the sub-national government level in Croatia. A significant divergence of budgetary outturns from the original approved budget, both on the revenue and expenditure side of the budget, confirms the hypothesis about low credibility of the budget at the sub-national level in Croatia. The paper also analyzes the impact of expenditure structure on the performance of the sub-national government level in Croatia. The results presented in this paper identify the main policies which the sub-national government uses to encourage local and regional development in Croatia. However, the results show that the budget does not incorporate any aspects of strategic planning, which is necessary to achieve local and regional development. The substantial difference between planned and realized budgetary expenditures is a key obstacle to faster local and regional development.local and regional development, local and regional policy, performance measurement, Croatia

Regional Development and Decentralization – two Options to Overcome Lack of Funding

<p>Decentralization can be generally described as a process in which selected functions are assigned to sub-national units. The literature identifies a number of positive consequences of decentralization which all lead to a better satisfaction of citizens’ needs for public services. Although the decentralization process in Croatia started more than ten years ago, it has not yet been completed. While leading to a new allocation of authorities and responsibilities to local government units, the level of fiscal decentralization remained lower than in the EU countries.</p><p>In this paper we analyze the fiscal capacity of local government units to provide an insight into the main problems of decentralization in Croatia. We show that most local government units have very low fiscal capacity, which is insufficient for financing basic public functions with their own resources. The paper presents the results of a survey relating to the decentralization process conducted among local councilors at the regional level in Croatia. We explore how local councilors at the regional level evaluate different goals of decentralization. With the lack of fiscal capacity in mind, we identify two possible solutions for an optimal provision of public functions. The first one is the level of political will for a joint provision of public functions by different local units, and the second one is a change in the territorial organization of the country. We measure the difference in the attitudes toward these questions across counties.</p