economic and social development - ss. cyril and methodius
TRANSCRIPT
Varazdin Development and Entrepreneurship Agency and University North in cooperation with
Faculty of Management University of Warsaw Faculty of Law, Economics and Social Sciences Sale - Mohammed V University in Rabat
Polytechnic of Medimurje in Cakovec
Economic and Social Development
49th International Scientific Conference on Economic and Social Development Development – "Building Resilient Society"
Book of Proceedings
Editors: Darko Dukic, Tomasz Studzieniecki, Jasmina Grzinic
Zagreb, 13-14 December 2019
Varazdin Development and Entrepreneurship Agency and University North in cooperation with
Faculty of Management University of Warsaw Faculty of Law, Economics and Social Sciences Sale - Mohammed V University in Rabat
Polytechnic of Medimurje in Cakovec
Editors: Darko Dukic, Josip Juraj Strossmayer University of Osijek, Croatia
Tomasz Studzieniecki, Gdynia Maritime University, Poland Jasmina Grzinic, Juraj Dobrila University of Pula, Croatia
Economic and Social Development 49th International Scientific Conference on Economic and Social Development Development –
"Building Resilient Society"
Book of Proceedings
Zagreb, 13-14 December 2019
Title ◼ Economic and Social Development (Book of Proceedings), 49th International Scientific Conference on Economic and Social Development Development – "Building Resilient Society"
Editors ◼ Darko Dukic, Tomasz Studzieniecki, Jasmina Grzinic
Scientific Committee / Programski Odbor ◼ Marijan Cingula (President), University of Zagreb, Croatia; Sandra Raquel Alves, University of Aveiro,
Portugal; Ayuba A. Aminu, University of Maiduguri, Maiduguri, Nigeria; Anona Armstrong, Victoria University, Australia; Gouri Sankar
Bandyopadhyay, The University of Burdwan, Rajbati Bardhaman, India; Haimanti Banerji, Indian Institute of Technology, Kharagpur, India; Elisabeth
de Jesus Oliveira Brito, University of Aveiro, Portugal; Alla Bobyleva, The Lomonosov Moscow State University, Russia; Leonid K. Bobrov, State
University of Economics and Management, Novosibirsk, Russia; Rado Bohinc, University of Ljubljana, Slovenia; Zeki Atil Bulut, Dokuz Eylul
University, Turkey; Adnan Celik, Selcuk University , Konya, Turkey; Angelo Maia Cister, Federal University of Rio de Janeiro, Brasil; Alexey Chernov,
RUDN University, Russian Federation; Przemyslaw Chmielecki, Higher Baptist Theological Seminary in Warsaw, Poland; Mirela Cristea, University
of Craiova, Romania; Sreten Cuzovic, University of Nis, Serbia; Oguz Demir, Istanbul Commerce University, Turkey; T.S. Devaraja, University of
Mysore, India; Onur Dogan, Dokuz Eylul University, Turkey; Darko Dukic, University of Osijek, Croatia; Gordana Dukic, Univers ity of Osijek,
Croatia; Alba Dumi, Vlora University, Vlore, Albania; Ksenija Dumicic, University of Zagreb, Croatia; Galina Pavlovna Gagarinskaya, Samara State
University, Russia; Fran Galetic, Zagreb University, Croatia; Mirjana Gligoric, Faculty of Economics - Belgrade University, Serbia; Maria Jose
Angelico Goncalves, Porto Accounting and Business School - P.Porto, Portugal; Mehmet Emre Gorgulu, Afyon Kocatepe University, Turkey; Klodiana
Gorica, University of Tirana, Albania; Aleksandra Grobelna, Gdynia Maritime University, Poland; Liudmila Guzikova, Peter the Great Saint Petersburg
Polytechnic University, Russia; Anica Hunjet, University North, Koprivnica, Croatia; Oxana Ivanova, Ulyanovsk State University, Ulyanovsk, Russia;
Irena Jankovic, Faculty of Economics, Belgrade University, Serbia; Lara Jelenc, University of Rijeka, Croatia; Myrl Jones, Radford University, USA;
Gorazd Justinek, Graduate School of Government and European Studies, Slovenia; Hacer Simay Karaalp, Pamukkale University, urkey; Grzegorz
Karasiewicz, University of Warsaw, Poland; Dafna Kariv, The College of Management Academic Studies, Rishon Le Zion, Israel; Salih Katircioglu,
Eastern Mediterranean University, Northern Cyprus, Turkey; Hilal Yildirir Keser, Uludag University, Bursa, Turkey; Sophia Khalimova, Institute of
Economics and Industrial Engineering of Siberian Branch of Russian Academy of Science, Novosibirsk, Russia; Marina Klacmer Calopa, University
of Zagreb, Croatia; Vladimir Kovsca, University of Zagreb, Croatia; Goran Kozina, University North, Koprivnica, Croatia; Dzenan Kulovic, Univeristy
of Zenica, Bosnia and Herzegovina; Robert Lewis, Les Roches Gruyere University of Applied Sciences, Bulle, Switzerland; Ladislav Lukas, Univ. of
West Bohemia, Faculty of Economics, Czech Republic; Pascal Marty, University of La Rochelle, France; Vaidotas Matutis, Vilnius University,
Lithuania; Marjana Merkac Skok, GEA College of Entrepreneurship, Ljubljana, Slovenija; Daniel Francois Meyer, North West University, South
Africa; Gabriela Mezeiova, Slovak Centre of Scientific and Technical Information, Slovak Republic; Marin Milkovic, University North, Koprivnica,
Croatia; Raquel Filipa do Amaral Chambre de Meneses Soares Bastos Moutinho, University of Porto, Portugal; Zlatko Nedelko, University of Maribor,
Slovenia; Gratiela Georgiana Noja, West University of Timisoara, Romania; Zsuzsanna Novak, Corvinus University of Budapest, Hungary; Alojzy Z.
Nowak, University of Warsaw, Poland; Tomasz Ochinowski, University of Warsaw, Poland; Mislav Ante Omazic, University of Zagreb, Croatia;
Barbara Herceg Paksic, University of Osijek, Croatia; Vera Palea, Universita degli Studi di Torino, Italy; Dusko Pavlovic, Libertas International
University, Zagreb, Croatia; Igor Pihir, University of Zagreb, Croatia; Dinko Primorac, University North, Koprivnica, Croatia ; Zeljka Primorac,
University of Split, Croatia; Miroslaw Przygoda, University of Warsaw, Poland; Karlis Purmalis, University of Latvia, Latvia; Nicholas Recker,
Metropolitan State University of Denver, USA; Kerry Redican, Virginia Tech, Blacksburg, USA; Humberto Ribeiro, University of Aveiro, Portugal;
Robert Rybnicek, University of Graz, Austria; Amelia Cristina Ferreira da Silva, Polytechnic of Porto, Portugal; Joanna Stawska, University of Lodz,
Poland; Tomasz Studzieniecki, Gdynia Maritime University, Poland; Elzbieta Szymanska, Bialystok University of Technology, Poland; Katarzyna
Szymanska, The State Higher School of Vocational Education in Ciechanow, Poland; Jan Turyna, University of Warsaw, Poland; Ilaria Tutore,
University of Naples Parthenope, Italy; Rebeka Danijela Vlahov, University of Zagreb, Croatia; Ilko Vrankic, University of Zagreb, Croatia; Stanislaw
Walukiewicz, Bialystok University of Technology, Poland; Thomas Will, Agnes Scott College, USA; Li Yongqiang, Victoria University, Australia;
Peter Zabielskis, University of Macau, China; Tao Zeng, Wilfrid Laurier University, Waterloo, Canada; Grzegorz Zimon, Rzeszow University of
Technology, Poland; Snezana Zivkovic, University of Nis, Serbia.
Review Committee / Recenzentski Odbor ◼ Marina Klacmer Calopa (President); Ana Aleksic; Sandra Raquel Alves; Ayuba Aminu; Mihovil
Andjelinovic; Josip Arneric; Lidija Bagaric; Tomislav Bakovic; Sanja Blazevic; Leonid Bobrov; Ruzica Brecic; Anita Ceh Casni; Iryna Chernysh;
Mirela Cristea; Oguz Demir; Jasmina Dvorski; Stjepan Dvorski; Robert Fabac; Ivica Filipovic; Sinisa Franjic; Fran Galetic; Mirjana Gligoric; Tomislav
Globan; Anita Goltnik Urnaut; Tomislav Herceg; Irena Jankovic; Emina Jerkovic; Dafna Kariv; Oliver Kesar; Hilal Yildirir Keser; Tatjana Kovac;
Vladimir Kovsca; Angelo Maia Cister; Katarina Marosevic; Vaidotas Matutis; Marjana Merkac Skok; Josip Mikulic; Ljubica Milanovic Glavan; Daniel
Francois Meyer; Natanya Meyer; Guenter Mueller; Ivana Nacinovic Braje; Zlatko Nedelko; Gratiela Georgiana Noja; Zsuzsanna Novak; Alka Obadic;
Claudia Ogrean; Igor Pihir; Najla Podrug; Vojko Potocan; Dinko Primorac; Zeljka Primorac; Sanda Renko; Humberto Ribeiro; Vlasta Roska; Souhaila
Said; Armando Javier Sanchez Diaz; Tomislav Sekur; Lorena Skuflic; Mirko Smoljic; Petar Soric; Mario Spremic; Matjaz Stor; Tomasz Studzieniecki;
Lejla Tijanic; Daniel Tomic; Boris Tusek; Rebeka Daniela Vlahov; Ilko Vrankic; Thomas Will; Zoran Wittine; Tao Zeng; Grzegorz Zimon; Snezana
Zivkovic; Berislav Zmuk.
Organizing Committee / Organizacijski Odbor ◼ Domagoj Cingula (President); Djani Bunja; Marina Klacmer Calopa; Spomenko Kesina; Erlino
Koscak; Tomasz Ochinowski; Miroslaw Przygoda; Michael Stefulj; Rebeka Danijela Vlahov; Sime Vucetic.
Publishing Editor ◼ Spomenko Kesina, Mario Vrazic, Domagoj Cingula
Publisher ◼ Design ◼ Print ◼ Varazdin Development and Entrepreneurship Agency, Varazdin, Croatia / University North, Koprivnica, Croatia /
Faculty of Management University of Warsaw, Warsaw, Poland / Faculty of Law, Economics and Social Sciences Sale - Mohammed V University in
Rabat, Morocco / Polytechnic of Medimurje in Cakovec, Cakovec, Croatia
Printing ◼ 100 CD
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Our past Books are indexed and abstracted by ProQuest, EconBIZ, CPCI (Web of Science) and EconLit databases and available for download in a PDF
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© 2019 Varazdin Development and Entrepreneurship Agency, Varazdin, Croatia; University North, Koprivnica, Croatia; Faculty of
Management University of Warsaw, Warsaw, Poland; Faculty of Law, Economics and Social Sciences Sale - Mohammed V University in Rabat,
Morocco; Polytechnic of Medimurje in Cakovec, Cakovec, Croatia. All rights reserved. Authors are responsible for the linguistic and technical
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CONTENTS
APPLICATION OF AGENT-BASED MODELING IN DECISION-MAKING
MIGRATION POLICY .......................................................................................................1
Abramov Vladimir Ivanovich, Volkova Maria Igorevna
INFLUENCE OF INNOVATION ON THE LINER SHIPPING CONNECTIVITY ........6
Adrianna Karas
INCREASING SUBJECT MOTIVATION OF STUDENTS THROUGH USE OF
AUTHENTIC ADVERTISING MATERIALS ................................................................. 12
Zemfira Aksyanova, Uiliia Ostrovaya
INCREASING COMPETITIVENESS IN HIGHER BUSINESS EDUCATION – THE
CASE OF INTENSE PROJECT........................................................................................ 18 Mirna Leko Simic, Suncica Oberman Peterka, Aleksandar Erceg
THE ROLE OF MANAGERIAL ACCOUNTING IN THE CROATIAN HOTEL
INDUSTRY – EMPIRICAL RESEARCH ........................................................................ 26
Andreja Rudancic, Sandra Sokcevic, Marko Akmacic
RECALL OF DIGITAL CONTENT AS PART OF CONSUMER RESPONSE MODEL
............................................................................................................................................. 36 Anida Krajina, Dusan Mladenovic
DEMI MODELS` APPLICATION IN VARIANCE ANALYSIS .................................... 47 Anita Grubisic, Frane Galzina
MODELLING OF MILITARY EXPENDITURE OF THE CZECH REPUBLIC ......... 59 Jakub Odehnal, Jiri Neubauer
MULTITASKING IN PUBLIC ORGANIZATIONS - THE CASE STUDY OF A POLISH
UNIVERSITY ..................................................................................................................... 67
Artur Gajdos, Malgorzata Marchewka, Ewa Stroinska, Justyna Trippner-Hrabi
THE IMPACT OF FISCAL DECENTRALIZATION ON ECONOMIC GROWTH IN
THE CEE COUNTRIES .................................................................................................... 77
Suzana Makreshanska Mladenovska, Biljana Tashevska
FORECASTING CORRECTNESS OF INCURRING CREDIT WITH THE AID OF E.I.
ALTMAN’S, J. GAJDKA’S AND D. STOS’S DISCRIMINANT ANALYSIS MODELS
ON THE EXAMPLE OF 200 STUDIED COMPANIES FROM OPOLE AND SILESIAN
PROVINCES WITHIN 2010-2018 .................................................................................... 87 Rafal Parvi
EFFECTIVE CORPORATE INCOME TAX RATE FOR FIRMS ON ZAGREB STOCK
EXCHANGE ....................................................................................................................... 97
Jasenka Bubic, Jelena Vidovic
INTEROPERABILITY OF MACHINE LEARNING SERVICES: A USE CASE ....... 106
Darko Androcec, Andrea Tikvica
USE OF PERFORMANCE MEASUREMENT METHODS IN CROATIAN FIRMS . 114
Ana Roso, Davor Labas
DEVELOPING EPICUREAN HERITAGE TOURISM: THE ROLE OF LOCAL FOOD
AS A COMPONENT OF TOURISM IN BANGLADESH ............................................. 123 Islam Mohammad Hashanat
METHODS OF INTERCONNECTION PRICING SYSTEMS AND TECHNICAL
DRAWING SOFTWARE ................................................................................................ 142
Vojtech Domansky, Miloslav Vyskala
ENTRY EFFECTS UNDER STRATEGIC TRADE POLICY WITH UNIONIZED
FIRMS .............................................................................................................................. 152 Luciano Fanti, Domenico Buccella
THE INFLUENCE OF CORPORATE SOCIAL RESPONSIBILITY (CSR) ON BRAND
EQUITY ............................................................................................................................ 163
Milan Dzupina, Tomas Koprda, Andrej Veselei
ECONOMIC POLICY ASPECTS IN MANAGING LABOUR EMIGRATION FROM
UKRAINE ......................................................................................................................... 174 Dmytro Chylikin
TEACHING THROUGH SOCIAL NETWORKS IN HIGHER EDUCATION: IS
THERE IMPACT ON STUDENTS' ENGAGEMENT? ................................................. 185 Dina Loncaric, Marina Perisic Prodan, Tomislav Car
THE ANALYSIS OF COMPANIES OF THE FUEL SECTOR BASED ON THE
EXAMPLE OF COMPANIES QUOTED ON THE WARSAW STOCK EXCHANGE IN
POLAND AND THEIR FAIR VALUE BETWEEN 2009-2019 ..................................... 193 Rafal Parvi
ROLE OF EDUCATION AND TRAINING ON INCOME IN DIFFERENT REGIONS
OF LATVIA ...................................................................................................................... 204
Biruta Sloka, Ginta Tora, Ilze Buligina, Juris Dzelme
SALES CHANNELS AND MEDIA DIGITALIZATION IMPACT ON PEOPLE
VOLUNTARY SAVINGS FOR RETIREMENT ............................................................ 211 Evija Dundure, Biruta Sloka
THE ADJUSTED ACQUISITION PRICE AS ONE OF THE PARAMETERS OF THE
MEASUREMENT OF FINANCIAL INSTRUMENTS .................................................. 219
Ewa Mackowiak
FILLING THE GAP: SOCIAL, URBAN AND TRANSITION DESIGN FOR BUILDING
RESILIENT SOCIETIES ................................................................................................ 227 Franka Grubisic
THE ROLE OF CORPORATIONS’ SOCIAL CONTRACTS IN THE RUSSIAN
SOCIETY DEVELOPMENT .......................................................................................... 235 Maximov Ilya, Kovtun Olga, Ivanenko Marina
THE POLISH INVESTMENT ZONE AS A NEW SOLUTION FOR SUPPORTING
INVESTMENTS AND SUSTAINABLE REGIONAL DEVELOPMENT .................... 243
Joanna Miklinska
FREE COMPETITION AND FISCAL POLICY IN EUROPEAN UNION .................. 253
Maria do Rosario Anjos
COOPERATION BETWEEN NON-GOVERNMENTAL ORGANIZATIONS AND
COMPANIES (POTENTIAL POSSIBILITIES - REAL LIMITATIONS) ................... 262 Hanna Mackiewicz
KEY INDICATORS OF ENTERPRISE FINANCIAL HEALTH: CASE STUDY IN THE
CZECH REPUBLIC ........................................................................................................ 271
Jakub Horak, Tomas Krulicky
MONEY SAVING - THE CHANCE FOR A HAPPY OLD AGE ................................. 280
Hristea Anca Maria
EMPLOYMENT OF PERSONS WITH DISABILITIES AND THEIR ROLE WITH
EMPLOYERS .................................................................................................................. 291 Ivan Peronja, Mario Dadic, Ante Mihanovic
PERCEPTION OF QUALITY OF HOTEL SERVICES ............................................... 306
Robert Stefko, Anna Tomkova, Ivana Ondrijova
DEVELOPING BUSINESS - IT ALIGNMENT SKILLS THROUGH DATA
MANAGEMENT: HIGHER EDUCATION EXAMPLE ............................................... 312 Borna Nikolic, Lucija Ivancic, Ljubica Milanovic Glavan
A COMPARATIVE STUDY OF MULTIPLE-CRITERIA DECISION-MAKING
METHODS: THEIR USE IN MODEL EXAMPLE OF FINANCIAL HEALTH ......... 322
Jaromir Vrbka
DISRUPTION ANALYSIS OF THE ARMY PERSONNEL IN THE
IMPLEMENTATION OF WEAPONS MODERNIZATION SYSTEM (CASE STUDY:
LEOPARD MAIN BATTLE TANK CAVALRY BATTALION) .................................. 331
Yusuf Ali, Suhirwan, Jonni Mahroza, Erna Nuraeni
OVERALL LIFE SATISFACTION IN LATVIA ........................................................... 342
Kate Cipane, Biruta Sloka
CLUSTERS AS A FORM OF EFFECTIVE COORDINATION OF INNOVATION
POLICY IN THE CONTEXT OF DIGITAL ECONOMY (CASE OF THE RUSSIAN
FEDERATION) ................................................................................................................ 352
Aleksandr Kurochkin
HOUSING AFFORDABILITY AS THE MOST SIGNIFFICANT SOCIO-ECONOMIC
INDICATOR .................................................................................................................... 358 Lyudmila Rudi, TatyanaTropnikova
ANALYSIS OF THE LABOUR MARKET IN CROATIA ............................................ 370 Marina Lolic Cipcic
CONSTRUCTING AND TESTING INSTRUMENTS FOR MEASURING STUDENTS’
PERCEPTIONS OF A UNIVERSITY AND ITS SMART DIMENSIONS ................... 380
Mario Jadric, Maja Cukusic
THE REGIONAL DIMENSION OF POVERTY - THE ROMANIAN CASE .............. 390
Nela Steliac
PHYSICAL CAPITAL INVESTMENTS AND LABOUR PRODUCTIVITY ACROSS
COUNTRIES – PANEL APPROACH ............................................................................ 403 Predrag Trpeski, Marijana Cvetanoska, Kristijan Kozheski
FINANCIAL ASSETS OF HOUSEHOLDS IN CROATIA – CHANGES IN
PREFERENCES: RESONS AND CONSEQUENCES ................................................... 411
Petar Misevic, Zvonimir Savic, Luka Burilovic
DOES THE YEAR 2020 BRING MAJOR CHANGES TO THE REAL ESTATE
MARKET OF GREEN BUILDINGS? ............................................................................ 420 Raluca Florentina Cretu
CHALLENGES OF THE FORMAL PROJECT MANAGEMENT EDUCATION IN
THE SENET REGION ..................................................................................................... 430 Rebeka D. Vlahov Golomejic
OCCUPATIONAL TRAINING WITHOUT COMMENCING EMPLOYMENT:
ADVANTAGES AND DISADVANTAGES .................................................................... 436
Renata Relja, Toni Popovic, Anita Marasovic
INVESTMENT EFFICIENCY OF TOURISM COMPANIES ...................................... 447
Catia Rosario
COMPARISON OF HIGHER EDUCATION SYSTEMS OF FINLAND AND TURKEY
........................................................................................................................................... 453 Sinem Dal
SEAPORT - CITY COOPERATION ON THE EXAMPLE OF THE CITY OF GDYNIA
........................................................................................................................................... 459
Slawomir Skiba
METHODOLOGICAL ASPECTS OF ASSESSING THE MARKET STRUCTURE:
CONCENTRATION AND EFFICIENCY ...................................................................... 467 Sofia Lyubyashenko
CROSS-REGIONAL COOPERATION IN THE EU FOR EFFECTIVE INNOVATION
DEVELOPMENT: EXPERIENCE FOR RUSSIA ......................................................... 474 Alexander Kurochkin, Svetlana Morozova
THE MOUNTAIN PARADIGM: THE ROLE OF THE ATLAS MOUNTAINS IN
SHAPING THE LIFE OF MOROCCAN MOUNTAIN INHABITANTS ..................... 487
Jamal Fezza, Sadik Maliki
THE PRINCIPLE OF PROTECTION AS A PRINCIPLE OF INTERNATIONAL
LABOR LAW ................................................................................................................... 496 Maria Joao Mimoso, Bruna Duarte
INTERNATIONALIZATION OF SMES IN ICT INDUSTRY: BUSINESS MODEL
PERSPECTIVE ................................................................................................................ 502
Tihana Koprivnjak
EXPLORING THE IMPACT OF CONSUMER IDENTIFICATION WITH USERS OF
THE SPORTS CLUB SOCIAL NETWORK .................................................................. 511 Zeljka Marcinko Trkulja, Jasmina Dlacic, Denis Tomse
THE ROLE OF RISK MANAGEMENT IN CORPORATE DECISION-MAKING.... 521 Veronika Machova
THE EFFECTS OF GLOBALIZATION ON GROWTH IN BRICS ECONOMIES ... 528 Aleksej Kondulukov, Vladimir Simic
KNOWLEDGE MANAGEMENT TECHNOLOGY AND HUMAN RESOURCES: AN
OVERVIEW ..................................................................................................................... 537 Vlatka Sekovanic, Sandra Lovrencic
INCREASING QUALITY AND PROFITABILITY OF RESTAURANT INDUSTRY
THROUGH THE INTRODUCTION OF THE MICHELIN GUIDE IN THE REPUBLIC
OF CROATIA .................................................................................................................. 545 Dominik Vukusic, Alica Grilec, Josip Mikulic
REVITALIZATION OF NIGERIA’S SCIENCE AND TECHNICAL EDUCATION IN
THE PROMOTION AND MANAGEMENT OF ECONOMIC GROWTH AND
DEVELOPMENT ............................................................................................................. 553 Ayuba A. Aminu, Aliyu Shugaba, Yahaya Yunusa Malgwi
THE IMPACT OF THE SOLID WASTE FEE SCHEME ON THE GENERATION AND
SEGREGATION OF WASTE BY THE RESIDENTS OF GDYNIA ............................ 561
Karolina Gwarda
BUSINESS ENVIRONMENT ASSESSMENT BASED ON PROFITS: A
COMPARATIVE STUDY OF THE CZECHIA AND SLOVAKIA .............................. 568 Zuzana Rowland
ENTREPRENEURSHIP DEVELOPMENT IN THE CONTEXT OF POSTMODERN:
FUTURE OF ENTREPRENEURSHIP OR ADAPTATION TO DEVELOPMENT OF
POSTMODERN SOCIETY ............................................................................................. 578
Josko Lozic, Marin Milkovic, Ines Lozic
THE IMPORTANCE OF THE EUROPEAN UNION SOLIDARITY FUND IN
BUILDING RESILIENT REGIONS ............................................................................... 591 Lela Tijanic, Petra Korent
EXPORT ACTIVITIES ANALYSIS OF THE NOVOSIBIRSK REGION COMPANIES
........................................................................................................................................... 602
Ilya Maximov, Olga Kovtun, Marina Ivanenko, Vera Ryaboshlyk
49th International Scientific Conference on Economic and Social Development – "Building Resilient Society" - Zagreb, 13-14 December 2019
77
THE IMPACT OF FISCAL DECENTRALIZATION ON ECONOMIC
GROWTH IN THE CEE COUNTRIES
Suzana Makreshanska Mladenovska
Ss. Cyril and Methodius University in Skopje,
Faculty of Economics, Skopje, Republic of Macedonia
Biljana Tashevska
Ss. Cyril and Methodius University in Skopje,
Faculty of Economics, Skopje, Republic of Macedonia
ABSTRACT
There has been a global trend of public sector decentralization over the last few decades,
justified by the fact that transferring public revenues and expenditures from central to local
government level is expected to deliver greater public sector efficiency, higher economic
growth rates and better overall macroeconomic performance. In this paper, we empirically
investigate if fiscal decentralization enhances or hinders economic growth in Central and
European (CEE) member countries of the European Union. Using panel data for the period
1992-2012, we try to determine whether fiscal decentralization, measured as the share of local
government revenues/expenditures in general government revenues/expenditures has a positive
effect on the GDP per capita growth rate. According to our findings, fiscal decentralization has
an adverse effect on the economic growth rate in the CEE countries. This is in line with the
argument that in developing countries decentralization could fail to deliver the expected
positive impulse on growth if certain economic and institutional preconditions are absent. A
negative impact is also found to come from the size of the public sector and inflation. On the
other hand, the improvement of the fiscal balance and the openness of the economy have a
positive impact on growth.
Keywords: CEE countries, Economic growth, Fiscal decentralization
1. INTRODUCTION
There has been a global trend of public sector decentralization over the last few decades, with
the expectation that transferring public revenues and expenditures from central to local
governments would deliver greater public sector efficiency, higher economic growth and better
overall macroeconomic performance. Developed countries were first to give their local
authorities greater fiscal power, autonomy and functions. Emerging countries followed,
however challenged by their institutional framework and capacity. Some authors find a positive
correlation between a country’s level of economic development and the level of public sector
decentralization (Pommerehne, 1976; Panizza 1999). Oates (1993) shows that larger and more
developed countries (with higher GDP per capita) have a higher level of fiscal decentralization.
Why is this the case? One view sees decentralization as a luxury good, hence the increase in
GDP p.c. increases the “demand” for decentralization. Decentralization becomes more
attractive for taxpayers, since the advantages and benefits of this process begin to surpass the
potential problems and disadvantages, present in less developed countries (Bahl and Linn,
1992). Another explanation is that most developing countries that implement intensive
decentralization reforms have inherited highly centralized systems in the moment of gaining
independence. Conyers (1990) claims that a country’s decentralization depends on the length
of the time period from its independence and the size of centralization of the previous
administrative system.
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Many authors agree that fiscal decentralization could in turn have a positive impact on growth,
through enhancing public sector efficiency, resource allocation and transparency (Oates, 1993;
Martinez-Vazquez and McNab, 2006 etc.). According to Oates (1972), local governments are
more efficient in resource allocation in the public sector, because they are better in identifying
citizens’ preferences for public goods and services (allocative efficiency) and are at the same
time in a position to provide public goods and services with lower costs (productive efficiency)
than central governments. Some argue that the positive effects of decentralization of economic
growth are more pronounced in developing than in developed countries, due to their
institutional characteristics. In these countries, decentralization is expected to induce larger
efficiency gains, resulting from the high transaction and administrative costs inherited from the
centralized political and administrative systems (Shah, 1994; 1999). However, the positive
impact on growth might not realize, if there is no well-designed and implemented process of
decentralization and if local governments and institutions have insufficient capacity for an
effective realization of the decentralized functions (Prud’Homme, 1995). Rodriguez-Pose and
Kroijer (2009) argue that in countries lacking appropriate institutions, instead of enhancing
economic growth and human capital, fiscal decentralization could have an inverse effect on
economic growth. Other authors argue that there is a positive, yet nonlinear link between
decentralization and economic growth (Wallis and Oates, 1988). Instead of a linear relationship,
it is more realistic to expect that there is a certain optimal level of public sector decentralization,
which has the strongest positive impact on economic growth (Thiessen, 2003). Thus, according
to Blochliger and Egert (2013), countries with lower initial level of public sector
decentralization can expect more pronounced positive effects of decentralization on economic
growth, compared to countries that have already reached a higher level of fiscal
decentralization. This paper aims to contribute to the scarce literature on the effects of fiscal
decentralization on economic growth in the Central and East European countries by exploring
this relationship for the period 1992-2012. Previous studies of the CEE countries include: Ebel
and Yilmaz (2002), Enikolopov and Zhuravskaya (2003), Rodriguez-Pose and Kroijer (2009),
Aristovnik (2012), Slavinskaite (2017). The rest of the paper is structured as follows. The
second section gives a brief review of the empirical literature on the effects of fiscal
decentralization on economic growth. The third section presents the applied data and
methodology, followed by a discussion of the empirical results and concluding remarks.
2. EMPIRICAL LITERATURE REVIEW
There is a growing body of literature focused on assessing the effects of fiscal decentralization
on economic growth in the last several decades.1 However, it has produced ambiguous results,
as there are many studies that find evidence for a positive, a negative, or no significant impact
of decentralization on growth (for an extensive review of studies see Szabo, 2017, or the meta-
analysis of empirical studies provided by Baskaran, Feld and Schnellenbach, 2014). The
existing empirical literature on the impact of decentralization on economic growth is dominated
by studies based on large and heterogeneous samples of developed and developing countries
(Davoodi and Zou, 1998; Woller and Phillips, 1998; Тhiessen, 2003; Enikolopov and
Zhuravskaya, 2003; Iimi, 2005; Martinez–Vasquez and McNab, 2006; Thornton, 2007;
Rodriguez – Pose and Kroijer, 2009; Im, 2010; Rodriguez – Pose and Ezcurra, 2011; Blochliger
and Egert, 2013), whereas a smaller number of studies explore this link on a single country
case, mostly exploring China (e.g. Zhang and Zou, 1998; Lin and Liu, 2000; Jin and Zou, 2005)
or the USA (e.g. Xie et al., 1999; Akai and Sakata, 2002).
1 It is still far smaller (especially for the CEE countries) than the vast empirical literature testing the relationship between decentralization and the size and efficiency of the public sector. This might be related to the fact that economic growth is not of special interest in the public finance theory, because the public sector does not have a direct role in increasing growth, but its role is mainly to provide favorable conditions and not hinder growth.
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There is no consensus among authors about the direction in which decentralization affects the
economic growth. Numerous studies confirm the existence of a significant positive relationship
between fiscal decentralization and economic growth (Lin and Liu, 2000; Akai and Sakata,
2002; Thiessen, 2003; Iimi, 2005; Buser, 2011; Blochliger and Egert, 2013; Slavinskaite, 2017).
Yet, some studies show that decentralization slows economic growth (Davoodi and Zou, 1998;
Zhang and Zou, 1998; Enikolopov and Zhuravskaya, 2003; Jin and Zou, 2005; Rodriguez –
Pose and Ezcurra, 2011; Baskaran and Feld, 2013), or that it does not have any impact on
growth (Woller and Phillips, 1998; Thornton, 2007; Asatryan and Feld, 2015). Unlike most
studies that assume the existence of a linear relationship between decentralization and economic
growth, Thiessen (2003) shows that although positive, the link is not linear, but has an inverse
“U” shape. This means that decentralization has a positive effect on growth up until the country
reaches a certain (optimal) level of decentralization, but above that level it begins to hinder
economic growth. The diminishing returns on decentralization are confirmed by Blochliger and
Egert (2013), who find that countries with a lower level of decentralization can expect more
pronounced positive effects on economic growth. Some studies find a different impact of fiscal
decentralization on growth in developed and developing countries. Davoodi and Zou (1998),
Im (2010) and Slavinskaite (2017) find no significant relation in developed countries and
provide mixed results for developing countries: Davoodi and Zou (1998) find a negative effect,
Im (2010) finds a negative effect in semi-developed countries and no significant effect in
developing countries and Slavinskaite (2017) finds a positive effect in less developed EU
countries (significant at the 10% confidence level). Canavire-Bacarreza et al. (2019) found a
small, but positive effect of revenue and expenditure decentralization in developed countries
and no significant effect in developing countries. If we analyze separately the effects of
decentralization of public revenues, public expenditures and the vertical imbalance, recent
studies conclude that revenue decentralization has more pronounced stimulating effects on
economic growth (Rodriguez – Pose and Kroijer, 2009; Blochliger and Egert, 2013; Gemmel
et al., 2013), while the vertical fiscal imbalance has pronounced adverse effects on growth
(Rodriguez – Pose and Kroijer, 2009). Finally, decentralization can have different effects on
economic growth depending on the influence of other institutional and political factors in a
country (Iimi, 2005; Enikolopov and Zhuravskaya, 2003; Buser, 2011). For example,
Enkilopov and Zhuravskaya (2003) conclude that decentralization can stimulate or hinder
economic growth in developing countries, depending on the quality of political parties and the
political governance in the country. Aristovnik (2012) relies on Buser’s (2011) finding that
decentralization has a greater positive effect on promoting growth in the presence of a sound
institutional environment, to try to explain the smaller success of fiscal decentralization in the
Eastern European economies.
3. DATA AND METHODOLOGY
3.1. Model
In the specification of the empirical model for investigation of the effects of decentralization
on economic growth we start from the classical model of exogenous economic growth (Solow,
1956), according to which growth is a function of two production factors: (labour (population)
and physical capital). Further, in the empirical model the human capital is added. According to
many authors, the countries that invest more in human capital have higher innovation rates (new
products and technologies), and thus have a tendency to grow faster than other countries
(Romer, 1994). In the end, we include in the model macroeconomic policy variables, following
Barro’s (1991) model of endogenous growth and the Levine и Renelt (1992) model. These
variables are: size of the public sector, macroeconomic stability (fiscal balance, inflation rate),
openness of the economy etc.
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Hence, the empirical model takes the following general form:
𝑒𝑐𝑜𝑛𝑜𝑚𝑖𝑐 𝑔𝑟𝑜𝑤𝑡ℎ𝑖𝑡 = 𝛽0 + 𝛽1 𝑝ℎ𝑦𝑠𝑖𝑐𝑎𝑙 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑡 + 𝛽2ℎ𝑢𝑚𝑎𝑛 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑡 +𝛽3𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛𝑖𝑡 + 𝛽4𝑚𝑎𝑐𝑟𝑜𝑒𝑐𝑜𝑛𝑜𝑚𝑖𝑐 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒𝑠𝑖𝑡+ 𝛽5𝑑𝑒𝑐𝑒𝑛𝑡𝑟𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛𝑖𝑡 + 𝑢𝑖𝑡
We estimate an unbalanced (due to data availability) panel regression model, which allows us
to use a larger number of observations for multiple countries and multiple periods. A fixed
effects model was used, as suggested by the Hausmann. White cross-section weights and first
order autoregression component (AR1) were used in order to correct heteroscedasticity and
serial correlation, respectively.
3.2. Data and variables
The empirical investigation was conducted on a sample of 11 countries from Central and
Eastern Europe (CEE countries), over the period 1992–2012. Due to data limitations, the sample
includes only the CEE countries that are EU members: Bulgaria, Croatia, the Czech Republic,
Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. A restraining
factor of our research is the fact that, unlike the case of old EU member states, for the new EU
member states, the time series are relatively short and macroeconomic data cannot be found
before the 1990s. On the other hand, we used the decentralization data series from the Fiscal
Decentralization Database of the World Bank that only provides decentralization data until
2012. Therefore, due to the limited and short time series, in this paper we do not examine the
long-term effects of fiscal decentralization. The dependent variable in the regression model is
the economic growth rate, measured by the annual real growth rate of GDP per capita. The main
explanatory variable in the model is fiscal decentralization, measured by two main indicators:
government expenditure decentralization (share of local government expenditures in total
government expenditures) and government revenue decentralization (share of local government
revenues in total government revenues). The physical capital is captured by two variables: the
ratio of gross savings to GDP and the gross fixed capital formation to GDP. The choice of the
appropriate indicators of human capital was not simple, taking that most of the tested variables
proved to be statistically insignificant. On the other hand, it is hard to assume that human capital
is not important to economic growth, so probably the reason for the statistical insignificance of
these variables comes from the limitations and discontinuity of the time series. Out of the tested
variables, we decided to include: secondary school enrollment ratio and the public expenditures
for education. Other tested variables include: tertiary education enrollment rate, public revenues
for science and research, as well as the number of patent applications and researchers per
million citizens. The impact of the macroeconomic policy is presented in the model with the
following indicators: public sector size i.e. government expenditures to GDP, budget balance
to GDP, inflation (annual growth rate of CPI), and the trade openness (ratio of imports and
exports of goods and services to GDP). In order to increase the explaining power of the model,
we include several demographic variables that are most often found in existing empirical studies
of economic growth, such as: population growth, urban population and dependent population
ratio. A detailed description of data and their sources are given in the Annex. The tables below
provide descriptive statistics for the variables there are our main focus and refer to the level of
economic growth and the level of fiscal decentralization. The descriptive statistic for GDP per
capita and GDP per capita growth rate (table 1) shows that, among the CEE countries, the lowest
average level of GDP p.c. is recorded in Bulgaria (3 131 USD), Romania (4 241 USD) and
Latvia (5 238 USD), and the highest average level of GDP p.c. in Slovenia (15 637 USD),
Czech Republic (11 447 USD) and Slovakia (10 205 USD). As for the economic growth rate,
measured by GDP p.c. annual growth, over the analyzed period, Estonia recorded the highest
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average growth rate (5.07%), followed by Poland (3.68%), Latvia (2.87%) and Croatia (2.72%),
while Romania, Czech Republic and Slovenia recorded the lowest growth rates (all below 2%).
Table 1: Descriptive statistics for GDP per capita (authors’ calculations)
Country GDP per capita, US $ GDP per capita, growth rate
Mean Std. Dev. Min. Max Mean Std. Dev. Min. Max
Bulgaria 3131 829 2218 4692 2.42 4.94 -8.56 10.82
Croatia 9309 1499 6532 11375 2.72 3.99 -6.83 10.04
Czech Rep. 11447 2200 8606 14612 1.68 4.09 -11.40 6.73
Estonia 8626 2706 4637 12275 5.07 6.10 -13.93 13.02
Hungary 8482 1745 5230 11534 2.01 3.49 -11.89 7.10
Latvia 5238 1734 3166 8999 2.87 7.87 -31.18 13.27
Lithuania 6780 2221 3819 10549 2.40 9.17 -21.17 11.15
Poland 7271 2119 4380 10753 3.68 3.03 -7.34 7.02
Romania 4241 922 3088 6073 1.66 5.55 -12.14 9.75
Slovakia 10205 2637 6822 15065 2.19 5.05 -14.64 10.46
Slovenia 15637 3182 10787 20683 1.77 4.35 -8.96 6.36
Descriptive statistics for the decentralization variables are presented in table 2. Over the
analyzed period, the most decentralized CEE countries (above 20% share of local government
expenditures in total government expenditures) are: Poland, Latvia, Hungary, Lithuania and
Estonia, while the least decentralized countries (below 15% share of local government
expenditures in total government expenditures) are: Croatia, Slovakia, Bulgaria and Slovenia.
The same conclusion stands for the revenue decentralization. CEE countries with a higher level
of expenditure decentralization also have a higher level of revenue decentralization and vice
versa. If we analyze the standard deviation, we can see that Slovakia, Romania and Poland
recorded the largest increase in expenditure and revenue decentralization (above 5 p.p.).
Table 2: Descriptive statistics for fiscal decentralization variables (Authors’ calculation)
Country Expenditure Decentralization Revenue Decentralization
Mean Std. Dev. Min. Max Mean Std. Dev. Min. Max
Bulgaria 14.94 1.87 11.25 18.62 15.86 1.73 12.42 18.19
Croatia 9.32 0.54 8.47 10.13 11.69 0.53 10.81 12.34
Czech Rep. 17.95 1.86 15.16 19.98 22.85 2.31 19.58 25.94
Estonia 21.47 2.54 17.58 24.35 21.87 1.98 17.70 25.06
Hungary 21.75 1.10 19.85 23.32 23.84 1.64 19.81 26.57
Latvia 22.32 1.84 18.01 24.94 24.91 0.81 23.46 26.40
Lithuania 21.58 2.31 18.35 27.65 22.92 3.20 18.84 30.64
Poland 23.56 4.45 13.81 28.95 27.43 5.05 16.61 33.02
Romania 15.97 5.12 8.74 22.90 19.44 4.97 11.95 26.64
Slovakia 11.36 5.03 4.55 16.18 13.09 5.46 5.59 18.40
Slovenia 13.46 2.99 8.37 16.35 16.16 3.38 10.76 19.92
4. RESULTS AND DISCUSSION
Table 3 summarizes the results of the estimated panel regressions. The regression equations (1)
and (3) refer to the effects of decentralization of government expenditures on the GDP growth
rate, while the equation (2) and (4) refer to the effects of decentralization of government
revenues. The equations (3) and (4) result from a process of individual testing and exclusion of
insignificant variables, which allowed for an additional testing and confirming the validity of
the relationship between decentralization and growth.
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Table 3: Panel regression results (Authors’ calculations)
Dependent variable: GDP per capita, annual growth rate
Independent variables:
(1) (2) (3) (4)
Exp decentralization -0.313***
(0.092)
-0.200*
(0.113)
Rev decentralization
-0.288***
(0.083)
-0.226**
(0.115)
Government
expenditures
-0.364**
(0.144)
-0.355***
(0.133)
Budget balance 0.529***
(0.133)
0.479***
(0.117)
0.581**
(0.230)
0.567***
(0.216)
Inflation -0.381***
(0.113)
-0.359***
(0.100)
-0.003*)
(0.002_
-0.004***
(0.001)
Openness 0.254***
(0.064)
0.248***
(0.066)
0.118***
(0.042)
0.105***
(0.039)
Savings -0.265
(0.291)
-0.316
(0.272)
Capital 0.662**
(0.306)
0.603**
(0.287)
0.434***
(0.160)
0.387***
(0.144)
School -0.104
(0.099)
-0.139
(0.094)
Education
expenditures
0.134
(0.216)
0.133
(0.193)
Population -1.501***
(0.543)
-1.558***
(0.590)
-1.506***
(0.330)
-1.611***
(0.355)
Urbanization -2.066**
(0.814)
-1.911**
(0.753)
-1.289***
(0.597)
-1.211**
(0.576)
Dependency 1.637***
(0.347)
1.584***
(0.330)
Constant 54.103
(39.909)
52.784
(35.359)
66.004**
(32.626)
64.727**
(32.697)
AR(1) 0.443***
(0.105)
0.420***
(0.115)
0.424***
(0.126)
0.375***
(0.119)
R^2 0.746 0.753 0.539 0.538
F-statistic 10.394*** 10.943*** 10.536*** 10.612***
Durbin-Watson
statistics
2.086 2.159 2.013 1.972
Cross - section 11 11 11 11
Sample 1996-2012 1996-2012 1992-2012 1992-2012
Observations 110 110 181 181
Note: The White heteroskedasticity consistent standard errors are given below the
coefficients.
*10% level significance, **5% level significance, ***1% level significance.
The regression results indicate that decentralization of government revenues and government
expenditures, ceteris paribus, has a statistically significant negative effect on economic growth
rates in CEE countries, confirming the results of Davoodi and Zou (1998), Rodriguez-Pose and
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Kroijer2 (2009), Im (2010). These finding is in line with some authors’ skepticism that
decentralization in developing countries, where certain economic, political and institutional
preconditions are not met, can ultimately have an adverse instead of a positive effect on growth
(Litvack et al., 1998; Dabla-Norris, 2006 etc.). Namely, decentralization is a multi-dimensional
process and its effects on macroeconomic performances do not depend solely on the level of
decentralization of public revenues and expenditures, but also on other factors, like the quality
and functioning of institutions, the public administration and the entire political system in
general. Such results are a motivation for further research of the macroeconomic implications
of decentralization, where beside fiscal decentralization, indicators of the administrative and
political dimensions of the decentralization process of the CEE countries will be included. The
results also indicate that the size of the public sector, i.e. the ratio of total general expenditures
to GDP, also exhibits a statistically significant adverse effect on growth. On the other hand,
higher public saving, i.e. improvement of the budget balance, is, as expected, growth enhancing.
Among the statistically significant variables with a positive impact is also the physical capital,
measured by the gross fixed capital formation to GDP. Unlike it, none of the tested human
capital variables had a statistically significant effect. Contrary to expectations, the secondary
school enrollment ratio even showed a negative coefficient, while a positive effect on the human
capital variable is provided only by the size of the public expenditures in education. Since it is
difficult to believe that human capital has no influence or has a negative influence on growth,
we believe this is attributed to the weakness of the chosen indicators and even more to the
limitations of the data series. As for the tested demographic variables, we found that population
growth rate and urban population share in total population have a significant negative effect,
while the dependency ratio has a significant positive effect to economic growth. Regarding the
other tested variables, in line with expectations, the inflation rate proved to have a significant
negative effect on growth, while the trade openness of the economy has a positive impact on
growth.
5. CONCLUSION
The main purpose of the paper was to contribute to the empirical literature on fiscal
decentralization, by estimating the impact of fiscal decentralization on economic growth in the
Central and Eastern European countries for the period 1992-2012. The existing body of research
provides mixed results regarding the positive or negative impact of fiscal decentralization on
economic growth. The empirical assessment in this paper showed that fiscal decentralization,
measured both by the share of local government revenues in total government revenues and by
the share of local government expenditures in total government expenditures, has an adverse
effect on economic growth in the Central and Eastern European countries. These findings are
in line with the argument that in developing countries decentralization could fail to deliver the
expected positive impulse on growth if certain economic and institutional preconditions are
absent. Namely, in developing and former centrally planned economies, the quality of
institutions, public administration and the political system in general, are less developed than
in developed countries and could prevent fiscal decentralization from delivering a positive
impulse on growth. Concerning the other independent variables, a negative impact is also found
to come from the size of the public sector and inflation. On the other hand, the improvement of
the fiscal balance and the openness of the economy have a growth-enhancing effect. Such
results are a motivation for future research of the macroeconomic implications of
decentralization for a larger sample of all EU countries, divided in two sub-samples (new EU
member states and old EU member states) in order to see if the macroeconomic implications of
decentralization differ in the two groups.
2 For public expenditure and transfers.
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Additionally, because longer data series are available for the old EU member states, we would
be able to investigate if the link between decentralization and growth is linear or parabolic, as
some authors suggest.
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APPENDIX
Table A.1: Variables: description and sources
Variable Description Source
Economic
growth GDP per capita growth (annual %)
World Development
Indicators, World Bank
Expenditure
decentralization
Local expenditures, % of general
government expenditures
Fiscal Decentralization
Database, World Bank
Revenue
decentralization
Local revenues, % of general government
revenues
Fiscal Decentralization
Database, World Bank
Government
expenditures
General government expenditures, % of
GDP
World Economic Outlook
Database, IMF
Budget Budget balance (surplus/deficit), % of
GDP
World Economic Outlook
Database, IMF
Inflation Inflation, consumer prices (annual %) World Economic Outlook
Database, IMF
Openness Trade (sum of exports and imports of
goods and services, % of GDP)
World Development
Indicators, World Bank
Savings Gross savings, % of GDP World Development
Indicators, World Bank
Capital Gross fixed capital formation, % of GDP World Development
Indicators, World Bank
Patents Patent applications, residents and
nonresidents
World Development
Indicators, World Bank
Researchers Researchers in R&D (per million people) World Development
Indicators, World Bank
School
School enrollment, secondary (ratio of
total enrollment to the population of the
age group)
World Development
Indicators, World Bank
University
School enrollment, tertiary (ratio of total
enrollment to the population of the age
group)
World Development
Indicators, World Bank
Education
expenditures
Public spending on education, % of
government expenditure
World Development
Indicators, World Bank
Research
Expenditures
Public spending on research and
development, % of government
expenditure
World Development
Indicators, World Bank
Population Population growth (annual %) World Development
Indicators, World Bank
Urbanization Urban population, % of total population World Development
Indicators, World Bank
Dependency
Age dependency ratio (people younger
than 15 or older than 64, % of working-
age population)
World Development
Indicators, World Bank