engleski

Less is more – Decentralisation in Croatia and Its Impact on Regional Development

This paper focuses on the current stage of decentralisation in Croatia. Higher level of decentralisation of administrative power and responsibilities is expected to result in increase of public sector efficiency, in strengthening of local and regional governance, as well as in increase of local and regional economic development. Fiscal decentralisation can be seen as the assignment of revenue sources and expenditure functions to sub-national levels of government. In July 2001 Croatia launched partial decentralization of its public functions. This first phase of decentralization included primary and secondary education, social welfare, health care and fire protection. Adopted model of decentralization implied that expenditures for wages in primary and secondary education, share of expenditures in health care and social welfare sector as well as capital investment are transferred to the counties and 32 big cities budgets. Implemented model of decentralization includes several changes in revenue sources. The first one is the possibility of introducing new municipal and city taxes, as well as the possibility of introducing different levels of surtax on income tax depending on the size of the municipality. Distribution of revenues usually shared between the state and sub-national government has also been changed. The major change was in the distribution of income tax revenues, with a larger part of revenues now being attributed to the local governments. Additional part of income tax revenue is reserved for covering expenditures regarding decentralized functions in primary and secondary education, health care, social welfare and fire protection. There have been established equalization grants for decentralized functions for local government units that do not have enough resources for financing decentralized functions. The share of revenues and expenditures of sub-national government in the total government budget revenues and expenditures, as well as share of these revenues in GDP - before and after 2001 – could indicate size of undertaken fiscal decentralization. In 2000, the year before the launch of decentralization process in Croatia, the share of local budget revenues in consolidated revenues of the general government budget totalled 10.9 percent while their share in GDP amounted to 5.4 percent. In 2008 respective shares amounted to 10.9 and 4.3 percent. Based on available data of local budgets and GDP by counties for the period 2000-2006, this paper will try to provide answers on the key research question: «What is the relationship between the current level of decentralisation and the existing level of regional development?» Previous studies in the decentralisation literature focus mainly on expenditure-based measures of decentralisation. In the other hand, in most of countries local and regional economic development is not an obligatory function of local and regional governments. However, the large majority of sub-national governments feel responsible not only for public services prescribed by law, but also for the overall wellbeing of local communities. This also includes attempt to stimulate local and regional economic growth. This is the reason why this paper aims to quantify the impact of decentralisation by relating a certain measure of decentralisation to the economic outcomes at regional level in Croatia.

decentralisation; local and regional development; local and regional self-government units; Croatia

LSEE and Palgrave Macmillan series: New Perspectives on South East Europe