engleski

Regional Income and Unemployment Disparities in Croatia

1. INTRODUCTION Knowing the extent and structure of regional disparities is important not only for theoretical discussion, but it has a very strong policy dimension as it provides analytical grounds for devising special policies aiming to reduce these disparities. Our goal is to assess dynamics of regional disparities in Croatia, whether they are increasing in a period when country is entering into more mature phase of development characterized by stable growth of its economy and intensive preparations for joining the EU. We approach to regional disparities both from the perspective of income and unemployment in order to obtain more complete picture on the structure and the extent of total regional inequality in Croatia. Our special attention will be paid to within-regional disparities. 2. INCOME AND UNEMPLOYMENT REGIONAL DISPARITIES Most pronounced inequality has been recorded in terms of unemployment rate, both at the beginning and at the end of the period. In case of income indicators, highest disparities are noted according to gross wage per capita, while least ones according to average wage. Significant difference in disparities between gross average wage and gross wage per capita mean that differences in employment level had substantial impact on disparities according to gross wage per capita (and incomes per capita). It can be also noted that an increase in regional inequality took place according to all indicators. The highest increase occurred in terms of unemployment rate and the average wage, and a least one according to incomes per capita. In next step, we turn to calculation of within-county inequalities thanks to very useful property of Theil index to decompose total inequality into inequality within and between groups. In our case, it means that we can express total inequality as sum of between county inequality and within county inequality. Within-county inequalities turned out to be quite significant, most notably in case of incomes and gross wages per capita where they accounted about half of the total inequality in 2000. On the other hand, within-county contribution has fallen within all indicators meaning that overall inequality is becoming more driven by between county than within-county differences. In case of incomes per capita and gross wages per capita, a fall has occurred due to decrease of within-county inequality, while in the case of average wage it was due to lesser increase than in the case of between county contribution. Another aspect always interesting to investigate is impact of taxes on regional inequality. This is particularly important in case of Croatia as fiscal policy measures are one of key regional policy instruments at the moment. Results indicate that income tax had positive impact on reduction of regional disparities. Values of all inequality measures are considerably lower in case of disposable wages both in 2000 and 2005. Nevertheless, income tax did not prevent inequality to rise despite a major increase in number of local units enjoying favoured tax regime occurred during in 2002. 3. CONCLUSIONS Our main finding is that Croatia is faced with moderate regional income (in terms of personal income) and significant unemployment disparities. Policy makers should paid particular attention to the dynamics of disparities as results have shown that there has been an increase in inequality during observed period both of income and unemployment disparities. Interesting aspect of inequality analysis has been its decomposition on between-regions and within-regions component. Within-region inequality turned out to be quite significant share of total regional inequality, in case of all income and unemployment indicators. Still, its relevance is decreasing over time meaning that total inequality is becoming more driven by between-regions inequality than by within-region inequality. Results also demonstrated very weak correlation between income and unemployment within-region inequalities, while correlation between various income types is expectedly high. Results have proved that taxes play role in reducing regional income inequalities in Croatia, but that they were unable to prevent inequalities to rise despite intensified government’ s support through various fiscal measures for disadvantages units. Our final conclusion is that unemployment currently represents greatest “ regional problem” and that policy makers will have to increase efforts in order to make any substantial impact on reduction of regional disparities.

Regional disparities; Gini index; Theil index; Croatia

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