engleski

GOVERNMENT SPENDING BEHAVIOUR: HOW BIG PUBLIC SECTOR DO WE REALLY NEED?

The size of the "state" or the public sector is discussed among theoretical economists, practical economic politicians, lawyers, philosophers and other professions, but also among common people. Some advocate for the minimum role of the state, while others support a greater role of the state in social and economic development. Between these two extremes, there are many other, different, opinions, theories, models and ideologies. The size of public spending, the state budget deficit, the size of the public debt, the structure of state revenues and expenditures, both in absolute and relative terms are fundamental economic and starting political indicators in analysing the size, role and efficiency of the state. In this paper, the share of government spending as a percentage of GDP is analysed and compared for Croatia and selected peer countries. According to the empirical analysis, most EU Member States have public consumption of over 40% of GDP, where as in old (developed) EU member states, that number is about 45%, which puts Croatia within the EU average. In addition, the trend of public spending in EU countries clearly shows an increase with the beginning of the crisis in 2008. In addition, a decline is noticeable since 2010 when the crisis stopped. This has resulted in an increase of private consumption and investment, which is the reason why public spending could return to the pre-crisis period values. Efficiency of the public sector and public enterprises is not measured by the size of their profits, but by the growth rate of the economy, full employment, real income growth and its even distribution among the citizens, low inflation, budgetary equilibrium in the long-run, export and import balance and negligible external debt. The state is efficient, as far as it can efficiently organize the public sector in accordance with social goals.

public sector, structure of government expenditure, Croatia, EU

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