Naslov
Estimate of the size of the underground economy in Croatia and the impact on the macroeconomic policy

Autori
Lovrinčević, Željko ; Mikulić, Davor ; Galić Nagyszombaty, Andrea

Vrsta, podvrsta i kategorija rada
Radovi u zbornicima skupova, cjeloviti rad (in extenso), znanstveni

Izvornik
Sixth International Conference on Enterprise in Transition Proceedings / Reić, Zlatan et al. - Split : Ekonomski fakultet Sveučilišta u Splitu, 2005, 253-255

Skup
6th International Conference on Enterprise in Transition

Mjesto i datum
Bol, Hrvatska; Split, Hrvatska, 26.05.2005. - 28.05.2005

Vrsta sudjelovanja
Predavanje

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
Underground economy; Eurostat approach; Exaustiveness of national accounts; macroeconomic indicators; Croatia

Sažetak
1. SCOPE OF RESEARCH European Union (EU) introduced explicit obligation for all new member states (NMS) concerning inclusion of the underground economy (UE) in the official gross domestic product (GDP). Since numerous EU financial entitlements and obligations are related to the value of GDP per capita, new members are requested to estimate and include UE. Since Croatia has not participated in the exhaustiveness project, its official GDP figure is incomparable to GDP of NMS. Our main hypothesis is that inclusion of the UE in national accounts has the most influence on the fiscal sector, while other macroeconomic indicators are less affected. This paper deals with the estimation of the UE in Croatia and its impact on the macroeconomic indicators. These indicators are the size of public sector expenditures and revenues, public deficit and debt, the current account deficit, the external debt and the Maastricht criteria. UE is analysed in period 1998-2003. The basic methodology used in the estimate of the size of the underground economy is the Eurostat method. This approach provides a framework for the estimate of the UE that is particularly well suited for the transition countries. As far as the size of the UE is concerned this method is the most conservative in comparison with other methods (monetary, input method, MIMIC) and generates results on average 2.1 times lower than other methods. 2. UNDERGROUND ECONOMY IN CROATIA IN PERIOD 1998-2003 According to recommendations of the Eurostat exhaustiveness project, new EU members have corrected their GDP figures to include the UE estimates. In 2000, the average correction of official GDP figure for new EU member states amounted to 12.1 % of the GDP, ranging from 5.8% (Malta) to 18.9% (Lithuania). Total underground economy in Croatia, as a percentage of GDP was estimated at: 11, 03% in 2003, 10, 7% in 2002, 10, 3% in 2001, 10.9% in 2000, 9.9% in 1999, while this figure amounted to 11% in 1998. Although the proportion of the underground economy by activities do substantially differ, the total proportion of the UE in the 1998-2001 period ranged from the lowest 9.9% in 1999 to the highest 11% in 1998. Average of other non-Eurostat methods points to the upper limit of UE in Croatia, 23% of the GDP in 2003. Results are fully comparable to other new EU member and candidate states. The UE inclusion reduces the gap between Croatia and the EU-25, in terms of GDP per capita (PPP). The new Croatian development level is 48.9%, while previously, without the UE estimates, it stood at 44% of EU-25. Public sector expenditures are also reduced from 49.5% to 44.6%, placing Croatia below the NMS-8 average (48.4%), therefore reducing the credibility of the hypothesis that Croatia is characterised by high public sector expenditures. When considering the current account deficit and the share of the foreign debt in the GDP after the UE inclusion, Croatian position does not change substantially in relation to NMS. Similar conclusion can be drawn for the balance of payments deficit and foreign debt burden. Even after the UE inclusion Croatia does not meet the Maastricht public sector deficit criteria (reference value is -3%). As for the public sector debt, country meets reference value of 60% with or without the UE inclusion. The UE inclusion issue should be treated in a proper economic and political framework in accordance to EU requirements in accession process. Otherwise the UE estimate, followed by expected GDP adjustments might be misused in economic and social policy implementation.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA