Research :: Finished research :: 2001-2005
Economic Aspects of Improving the Social Picture of Croatia

Project manager: Predrag BejakoviŠ, Institute of Public Finance

Researchers: Vjekoslav BratiŠ, Institute of Public Finance
  Zoran Bubaš, Institute of Public Finance
  James W. Dean, Simon Fraser University, Burnaby, Canada
  Jean-Jacque Dethie, University of Bonn, Germany
  Danijela Kuliš, Institute of Public Finance
  Mirjana JerkoviŠ, Institute of Public Finance

As the issue of poverty in Croatia is relatively neglected in scientific analyses – although there are some high-quality surveys – the Institute of Public Finance and the Friedrich Ebert Foundation as a part of the project Economic Aspects of Improving the Social Picture of Croatia organised the round table Poverty and the Possibilities of Palliating It in Croatia on 15 November 2004. The intention of the organisation was to discuss poverty from different positions, and to explain the role of development, social, pension and tax policies in its mitigation. A selection of papers from the roundtable is printed in the issue of Financial Theory and Practice, 29 (1), 2005.

Generally, the causes of poverty in Croatia can be linked in part with limited employment possibilities and low educational endowments. Thus, it is necessary to enhance the flexibility of the labour market, increase employment demand and supply, stimulate the finishing of primary (basic) education and higher participation in secondary education. Also, it is necessary better to target measures in the welfare sector to the most vulnerable part of society. Comparative analysis shows that the rates of relative poverty in Croatia do not differ much from the EU average, although Croatia has a higher poverty rate than that most EU members. The total system of social transfers is not less effective than those in most EU members.

Long-term unemployed persons are faced with higher risks of falling into penury, while a depreciation of human capital due to unemployment and a weak link with the labour market enforce the vicious circle of social exclusion and poverty. Regarding unemployment and long-term unemployment – often important factors that determine poverty - Croatia does not differ much from other countries in transition, although its rates are higher than the average in other countries. Among other proposals, it is important to increase the amount of unemployment benefit instead of prolonging its duration. It is also necessary better to target labour policy measures to the most vulnerable citizens and groups with lower employability.

According to the household expenditure survey, the results point to a mild increase, - or, depending on the measure of inequality used, no significant change - in inequality in the distribution of total income in the last few years. Wages and salaries have become an increasingly important source of household income, and there are indications of increased inequality in their distributions. In the last few years there has been a decline in the concentration of income from self-employment, so its distribution becomes more similar to the distribution of employed persons’ wages and salaries.

The most important functions of the pension system are redistribution of income of individuals and families over the whole life span, and maintaining social cohesion by reducing poverty during old age and work inactivity. Croatia has a high number of pensioners and huge expenditures for pensions, while pensioners receive pensions in small amounts and are seriously exposed to poverty. Although, in the last ten years, the average pension has decreased as a percentage of the average wage, the real value of the pensions and social security of retired persons has increased. The introduction of the minimum pension contributed to maintaining solidarity and the social security of pensioners with smaller pensions.

In the Project were analyses possibilities of different measures in poverty alleviation as incentives for economic development and growth, especially the role of the state in economic change, creating employment possibilities, improving the human capital, obtaining an efficient welfare system, decentralisation, reduction of corruption and institution development. There is no single model for the eradication of poverty, economic inequality and social exclusion that is optimal for all societies. Like every other country, Croatia has to find and develop constitutional and legal arrangements that best suit its own historical, social, cultural and economic situations, conditions and possibilities.

Croatia is in the process of welfare and social security reform, and different measures are directed towards the eradication of poverty and inequality. Monitoring the effects of a particular programme and measures is especially important in the successful realisation of these reforms. It is necessary for obtaining the information about who is exposed to poverty and social exclusion. This would improve policy and realise better targeting of the public aid system to the most vulnerable social groups.

Project manager Predrag BejakoviŠ was also very active with contributions in Journal Mirovinsko osiguranje. Thus, in No. 7 from 2004 was published his text German pension insurance and its reform, while in No. 8 from 2004 he contributed with the article The Activities of the European Union in the Development of Social Protection System. In year 2005, issue No. 9 contains his article Characteristics and Specifics of the Evasion of Pension Insurance Contributions. In Revija za socijalnu politiku, No. 3-4 from 2004 was published his text The Justification of Workfare Programmes in the World and in the Republic of Croatia.

As unemployment is Croatian very serious problem, project manager also participated as the local expert in the preparation of Croatian National Employment Action Plan prepared with 10 EU Specific Guidelines. He also contributed in UNDP Human Development Report: Croatia 2005 dedicated to social inclusion.

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