Saša Drezgić

Fiscal Policy and Competitiveness in Croatia

The chapter deals with key underlying factors that shape impact of fiscal policy on Croatian competitiveness. These are historical and political factors, impact of international institutions, structural problems of Croatian economy and different policy actors within the country. The paper limits its focus to overall effects of government spending, tax policy and structure and interaction of fiscal and monetary policy. The main argument is that fiscal policy was not conducive to improvement on the level of competitiveness mostly due to inability of main political forces to devise a consistent, sustainable and feasible long-term plan of economic development. Fiscal policy adapts to dynamics of economic system and basis on ad hoc decision-making. Continuations of such a policy will inevitably lead to social clashes and tensions. The paper suggests another path, which is much more endogenous but demands high level of social capital in the country.

Local Government Borrowing in Europe – Lessons for Croatia

The paper surveys models of local public borrowing across Europe. It begins by discussing some theoretical issues on local deficit financing. Positive and negative sides of local public borrowing are analysed. Legal framework for local borrowing in EU members and the relation between the sub-national government fiscal discipline and rigidity of constraints on borrowing is also examined. At the end, Croatian model of local borrowing is presented. Some lessons are drawn from experience of EU countries. Finally, according to theoretical and empirical finding, some proposals for improving the Croatian model of sub-national borrowing are stipulated.

A Tax Regulatory Laffer Curve

In this chapter, attention is drawn to the regulatory costs of taxation. From an economic point of view, tax regulatory costs are discussed. First, a theoretical Laffer-curve for tax regulatory costs is developed. Next, an overview is given of literature on tax regulatory costs. Finally, some remarks are made about the incidence of a tax regulatory Laffer curve.