Fiscal decentralization and local economic growth in Serbia

Abstract

Sažetak:U ovom radu analiziramo, koristeći panel regresiju sa fiksnim efektima, odnos između nivoa fiskalne decentralizacije i ekonomskog rasta u jedinicama lokane samouprave u Srbiji u periodu 2002-2011. godina. Naši rezultati ukazuju da postoji skroman pozitivan uticaj fiskalne decentralizacije na lokalni ekonomski rast u tom periodu u Srbiji. Jedan od dva posmatrana parametara (nivo zaposlenih u lokalnoj samoupravi i investicije lokalne samouprave) koji su korišćeni za dokaz naše hipoteze bio je pozitivan na rast stepena fiskalne decentralizacije. Veliki rast izvornih prihoda lokalne samouprave uglavnom su iskoristile za povećanje broja zaposlenih i plata u lokalnoj administraciji, dok je istovremeno broj zaposlenih u privredi smanjen. Istovremeno, rast izvornih prihoda neznatno je uticao na rast investicija. Na osnovu empirijske analize utvrđeno je da na oko 100 miliona dinara prosečnog godišnjeg rasta prihoda po jedinici lokalne samouprave u posmatranom periodu, svega 27.000 dinara u proseku je odlazilo na povećanje investicija. Pitanje optimalnog nivoa fiskalne decentralizacije kao i mogućnosti povećanja izvornih prihoda u okviru postojećeg zakonskog okvira takođe su bile diskutovane.Ključne reči: fiskalna decentralizacija, ekonomski rast, lokalna samouprava, Srbija Abstract:In this paper we examine, using a panel data approach with fixed effects, the relationship between the level of fiscal decentralization and economic growth across Serbian local self-governments over the 2002-2011 period. Our results suggest that there is a modest positive impact of fiscal decentralization on local economic growth in that period in Serbia. One of the two observed parameters (employment rates in local self-governments and local self-government investments) was positive in terms of the impact on the increased degree of fiscal decentralization. The substantial increase of local self-government own revenues was predominantly used to increase the number of employees and wages in local administrations, while, at the same time, the number of employees in the private sector dropped. At the same time, own revenue growth had only a slight impact on increase of investments. Based on an empirical analysis, out of approximately 100 million RSD of average annual increase of revenue per local self-government unit in the observed period, only 27,000 RSD on an average was directed towards increase of investments. The issue of the optimal level of fiscal decentralization, as well as the possibilities for increasing own revenues within the current legislative framework, were also discussed.

Stav a Perspektívy Verejných Financií v Eú

“…However, the existing empirical literature (e.g. , Radoslavljević, 2017, Bartlett, Đulic, and Kmezić, 2020 support our results that point to a structural break in the time series on the property tax´s portion on total local revenues in Serbia. Table 2 The results of tests reveal multiple breakpoints in the case of the sample including all the Serbian LSGUs and in the case of Groups II, III, and IVa, where besides the evident breakpoint in 2013 (with one exemption in Group IV, where the breakpoint is shifted to 2014) other breakpoints are present, too (see Table 2, breakdates).…”

“…1). One can consider it as a structural break and we can find some support also in Radoslavljević (2017), who admits a structural change in the time series after 2011, too.…”

“…Authors focusing on the fiscal decentralization of Serbia (Đulic, 2016, , Radoslavljević, 2017 mention the turnover in the decentralization of the public sector in Serbia. Radoslavljević (2017) sees a breakpoint in 2011.…”

“…Authors focusing on the fiscal decentralization of Serbia (Đulic, 2016, , Radoslavljević, 2017 mention the turnover in the decentralization of the public sector in Serbia. Radoslavljević (2017) sees a breakpoint in 2011. Until 2011 he regards fiscal decentralization as successful, after 2011 he describes the situation as "wandering what to do" with the local self-government in Serbia.…”

“…Against the potential success of the local sector in Serbia, the turbulent period of the GFC had been replaced by another turbulent era pronounced by many legislative changes in the transfer funding and wage taxes Radoslavljević, 2017). Instant and unpredictable cuts in local revenues made by the central government of Serbia encouraged the local-self-governments to raise property taxes to generate an additional source of financing for the local needs.…”