the first and the one - ruđer bošković institute...contents 1. abraham filip, studnicka zuzanna,...

THE FIRST AND THE ONE

PublisherUniversity of Belgrade, Faculty of Economics

Kamenička 6, phone 3021-045, fax 3021-065www.ekof.bg.ac.rs

E-mail: [email protected]

For Publisher the DeanProf. Marko Backović

Editor-in-ChiefAleksandra Praščević, PhD, Associate professor

Prepress, press & postpressČUGURA Printwww.cugura.rs

Year2012

ISBN: 978-86-403-1244-8

CONTENTS

1. Abraham Filip, Studnicka Zuzanna, Van Hove Jan HOW DISTINCT IS DISTANCE?

2. Aćimović Slobodan, Jovović Marija, Mijušković Veljko STRATEGIC OPTIONS FOR FINANCING COMMERCIAL AIRPLANE

PROCUREMENT- REGIONAL IMPLICATIONS

3. Ainsbury Ronald, Pešalj Biljana, Buivys Saulius CORPORATE SUSTAINABILITY AND RESPONSIBILITY AS A SOURCE OF

COMPETITIVE ADVANTAGE – CASE OF VAN HOUTUM COMPANY

4. Ambroziak Lukasz THE IMPACT OF THE ECONOMIC CRISIS ON AN INTRA-INDUSTRY TRADE IN

THE AUTOMOTIVE INDUSTRY IN THE EUROPEAN UNION

5. Arandarenko Mihail, Vladisavljević Marko, Žarković Rakić Jelena FROM INACTIVITY TO WORK: UNLEASHING THE UNTAPPED POTENTIAL OF

THE LABOUR FORCE IN SERBIA

6. Arsić Milojko, Nojković Aleksandra, Ranđelović Saša STRUCTURAL FISCAL DEFICIT IN SERBIA: EMPIRICAL ESTIMATION, CAUSES

AND SOLUTIONS

7. Bande Roberto, Riveiro Dolores PRIVATE SAVING RATES AND MACROECONOMIC UNCERTAINTY: EVIDENCE

FROM SPANISH REGIONAL DATA

8. Bartlett Will, Prica Ivana THE IMPACT OF THE EUROZONE CRISIS ON THE WESTERN BALKANS

9. Batanović Vladan, Guberinić Slobodan, Petrović Radivoj OPTIMIZATION VERSUS SUSTAINABILITY IN ECONOMIC SYSTEMS

10. Bessa Marcelo Facchina Macedo, Nemeth Adam POVERTY AND INCOME INEQUALITY IN NORTHEAST BRAZIL: THE EFFECT OF

FOREIGN TRADE

11. Bogićević Milikić Biljana, Janićijević Nebojša HIGHLIGHTING THE ROLE OF TRANSITION PROCESS IN SHIFTING THE FOCUS

OF THE HRM FUNCTION IN SERBIA

12. Bozdo Anilda, Tarka Viola BANKING SYSTEM FACING GLOBAL FINANCIAL CRISIS AND BANK OF

ALBANIA PROTECTION ROLE

13. Bratina Borut, Jovanovič Dušan, Bratina Miha, Virag Luka SHAREHOLDERS´ DUTY TO PERFORM REHABILITATION MEASURES

14. Bucevska Vesna, Bucevska Jasmina ESTIMATING AND FORECASTING STOCK MARKET VOLATILITY UNDER CRISIS:

EMPIRICAL EVIDENCE FROM THE MACEDONIAN STOCK EXCHANGE

15. Cerović Božidar, Nojković Aleksandra GROWTH AND INSTITUTIONS: POLITICAL AND CIVIL LIBERTIES AS A FACTOR

OF GROWTH IN TRANSITION ECONOMIES

16. Chatelain Jean-Bernard, Ralf Kirsten THE FAILURE OF FINANCIAL MACROECONOMICS AND WHAT TO DO ABOUT IT

17. Cingula Domagoj, Cingula Marijan MONETARY AND FISCAL POLICY WITH STRONG SOCIAL COMPONENT – A

DIFFERENT PATH TO GROWTH

18. Cuénoud Thibault EURO AREA DREAM, WHICH OPPORTUNITY TO REDEFINE POLICY

COORDINATION?

19. Dobardžić Eldin INTERACTIONS BETWEEN STOCK MARKET AND FOREIGN EXCHANGE

MARKET:THE CASE OF SERBIA

20. Draganac Dragana, Marjanović Milica DETERMINING THE RELIABILITY AND STABILITY OF BETA COEFFICIENT AS A

SYSTEMATIC RISK MEASURE IN CAPM

21. Dragutinović Mitrović Radmila, Bjelić Predrag EU ENLARGEMENT AND BILATERAL TRADE: The evidence from West Balkan

and CEE countries

22 Družić Ivo, Andabaka Badurina Ana, Gelo Tomislav FISCAL IMPACT ON EUROPEAN UNION MACROECONOMIC PERFORMANCE

23. Đukić Đorđe, Vasić Vladimir ANALYZING BEHAVIOR OF MOST TRADED SHARE PRICES ON BELGRADE

STOCK EXCHANGE BY APPLYING TRANSFER FUNCTION PROCEDURE

24. Đumić Slavko, Gligorić Lidija E-COMMERCE AND POSTAL SERVICES

25. Estrin Saul, Uvalić Milica FOREIGN DIRECT INVESTMENT IN TRANSITION ECONOMIES. ARE THE

BALKANS DIFFERENT?

26. Fabris Nikola, Žugić Radoje THE IMPACT OF STRUCTURAL CHANGES IN THE ECONOMIC SYSTEM ON

SELECTED DEMOGRAPHIC AND OTHER CHARACTERISTICS OF MONTENEGRO`S POPULATION

27. Filipović Jelena FREQUENCIES OF USE OF DIFFERENT ONLINE TOOLS ACCORDING TO USER’S

MOTIVATIONS

28. Gabrisch Hubert AGAINST THE WALL: EU GOVERNANCE REFORMS

29. Glišović Nataša, Almeida Ribeiro Rita, Milenković Miloš, Bojović Nebojša, Petrović Vladeta

A SA-BASED SOLUTION PROCEDURE FOR FUZZY TIME-COST TRADEOFF

30. Göktaş Deniz, Özer Mustafa EFFICIENCY OF REGIONAL INNOVATION SYSTEMS: KNOWLEDGE

PRODUCTION FUNCTION APPROACH TO TURKISH REGIONS

31. Grubišić Zoran, Hanić Hasan RELATIONSHIP BETWEEN TWIN DEFICITS, EXTERNAL DEBT AND T-BILLS

YIELD IN SEE COUNTRIES

32. Hadžić Fikret, Avdić Armin COMPARATIVE ANALYSES OF BUSINESS PERFORMANCES FOR METAL

INDUSTRY SECTOR IN BOSNIA & HERZEGOVINA, GERMANY AND CZECH REPUBLIC, USING BENCHMARKING METHODOLOGY

33. Hadžić Fikret, Prolaz Melisa THE ROLE OF REGULATORY AUTHORITIES IN THE GLOBAL FINANCIAL CRISIS

– NEW REGULATORY CHALLENGES AND RECOMMENDATIONS

34. Hajiyev Ramil COVERED BONDS AS A NEW FINANCIAL INSTRUMENT FOR AZERBAIJAN

CAPITAL MARKET

35. Hallett Andrew Hughes, Richter Christian HAS THE FINANCIAL CRISIS CHANGED THE BUSINESS CYCLE

CHARACTERISTICS OF THE GIPSI COUNTRIES?

36. Hölscher Jens, Nulsch Nicole, Stephan Johannes MODERNISATION OF STATE AID CONTROL IN THE ENLARGED EUROPEAN

UNION: THE FIRST DECADE

37. Hristova Snezana, Klisarovska Elena DESIGNING PUBLIC-PRIVATE PARTNERSHIP IN MACEDONIA: DESIGNING

CRISIS-RESILIENT STRATEGY

38. Ivanović Maja ESTIMATION OF MACROECONOMIC AND BANK-SPECIFIC DETERMINANTS OF

THE QUALITY OF LOANS IN MONTENEGRO

39. Jakšić Miomir SUSTAINABLE MACROECONOMIC POLICY AND GOOD GOVERNANCE: CASE OF

SERBIA

40. Janković Irena, Inđić Drago THE EUROZONE SOVEREIGN DEBT CRISIS AND RESTRUCTURING

ALTERNATIVES

41. Janković Milan, Matavulj Ljiljana THE IMPACT OF THE NATIONAL BROADBAND NETWORK ON THE ECONOMIC

GROWTH IN THE REPUBLIC OF SERBIA

42. Jevđović Gordana GROWTH-FRIENDLY TAX SYSTEM

43. Joksimović Ljubinka THE DETERMINANTS OF FISCAL CONSOLIDATION IN SOUTHEASTERN

EUROPEAN COUNTRIES

44. Jotanović Vera MECHANISMS OF THE LAST FINANCIAL CRISIS OF 2007: WHAT ARE THE

LESSONS LEARNED?

45. Jovanović Branimir HOW POLICY ACTIONS AFFECT SHORT-TERM POST-CRISIS RECOVERY?

46. Jovanović Gavrilović Biljana, Gligorić Mirjana, Molnar Dejan THE IMPORTANCE OF THE QUALITY OF ECONOMIC GROWTH IN THE SEARCH

FOR A WAY OUT OF THE CRISIS

47. Jovanović Mario POLITICAL INFLUENCE ON GERMAN BANKING SUPERVISION AND ITS IMPACT

ON ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM SURVEY DATA

48. Karadžić Vesna, Backović Vulić Tamara MONTENEGRIN CAPITAL MARKET CHARACTERISTICS BASED ON FINANCIAL

TIME SERIES ANALYSIS

49. Kiss Gábor Dávid, Ács Attila COMMON CURRENCY FOR CENTAL-EASTERN EUROPEAN COUNTRIES?

50. Knežević Vladan, Đeković Zoran COST MANAGEMENT OF NETWORK INDUSTRIES IN ECONOMIC CRISIS: A

CASE OF POSTAL SERVICE PROVIDERS

51. Kočović Jelena, Rakonjac Antić Tatjana, Jovović Marija EFFECTS OF PRIVATIZATION MODEL OF INSURANCE MARKET IN TRANSITION

ECONOMIES

52. Končar Jelena, Stanković Ljiljana PRIORITIES FOR THE FURTHER DEVELOPMENT OF CONSUMER PROTEC-TION

IN REPUBLIC OF SERBIA

53. Kordić Lana, Arnerić Josip DIFFERENCES IN THE EFFICIENCY OF VARIOUS HEALTH CARE PROVIDERS IN

CROATIA

54. Kovačević Radovan THE INFLUENCE OF THE GLOBAL FINANCIAL CRISIS ON THE BALANCE OF

PAYMENTS OF SERBIA

55. Koyama Yoji ALBANIA’S WAY TO EU ACCESSION AND HER CHALLENGES

56. Kozomara Jelena ROLE OF NON-EQUITY MODES OF INTERNATIONAL PRODUCTION IN SERBIAN

EXPORT STRATEGY

57. Krešo Sead, Karamujić M. H., Begović Selena THE GLOBAL FINANCIAL CRISIS (GFC) AND THE CHANGE OF SUPERVISION

FOCUS

58. Krstić Gorana LABOUR FORCE FLOWS AND INFORMAL ECONOMY IN SERBIA

59. Laušev Jelena THE EFFECT OF AUSTERITY MEASURES ON PUBLIC-PRIVATE SECTOR WAGE

GAP IN HUNGARY

60. Lokar Alessio, Bajzikova Lubica RECENT EUROZONE PROBLEMS FROM THE POINT OF VIEW OF LOCAL

BANKING SYSTEMS

61. Lovreta Stipe, Stojković Dragan THE NEW ROLE OF TRADE IN OVERCOMING THE ECONOMIC CRISIS AND

BUILDING MODERN MARKET ECONOMY

62. Lovrinović Ivan, Nakić Martina TRENDS IN FOREIGN EXCHANGE RESERVES STRUCTURING AND

MANAGEMENT WITH SPECIAL REFERENCE TO CROATIA

63. Lovrinović Ivan, Ćorić Tomislav, Nakić Martina BASE MONEY CREATION CHANNELS UNDER INSTABILITY

64. Maček Anita, Ovin Rasto ARE CAPITAL CONTROLS APPROPRIATE FOR PROTECTION OF THE STRATEGIC

INDUSTRIES? EVIDENCE FROM EUROPE

65. Mateljak Željko, Bilić Ivana DOES TYPE OF ORGANIZATIONAL STRUCTURE AFFECT ORGANIZATIONAL

PERFORMANCES? CASE STUDY OF CROATIA

66. Mihanović Damir THE EFFECT OF QUALITY MANAGEMENT SYSTEM ON MANAGERIAL PRACTICE

OF MAJOR CROATIAN COMPANIES

67. Mijatović Eva ACCOUNTING FOR BUSINESS COMBINATIONS

68. Miletić Snežana, Radić Siniša FAIR VALUE, ECONOMIC CRISIS AND INFORMATION RISKS: THE CHALLENGES

OF MEASUREMENT OF ASSETS OF VARIOUS LIQUIDITY

69. Miljak Toni IMPACT OF ECONOMIC CRISIS ON THE LIQUIDITY OF COMPANIES IN FOOD

INDUSTRY: EMPIRICAL RESEARCH IN CROATIA

70. Mitić Sanja, Gligorijević Mirjana GLOBAL CHALLENGES AND PERSPECTIVES OF MARKETING OF HEALTHY

FOOD PRODUCTS

71. Mitrović Đorđe, Pokrajac Slobodan, Tanasković Svetozar DOES GLOBAL ECONOMIC CRISIS INCREASE DIGITAL DIVIDE IN DEVELOPING

COUNTRIES? CASE OF SERBIA

72. Mladenović Zorica, Miletić Mirjana, Miletić Siniša VALUE AT RISK IN EUROPEAN EMERGING ECONOMIES: AN EMPIRICAL

ASSESSMENT OF FINANCIAL CRISIS PERIOD

73. Mladenović Zorica, Nojković Aleksandra THE NEW KEYNESIAN PHILLIPS CURVE IN EMERGING EUROPE: SOME

METHODOLOGICAL ISSUES AND EMPIRICAL RESULTS

74. Mojić Dušan INNOVATIVE MANAGEMENT STRATEGIES IN MULTINATIONAL COMPANIES:

CULTURAL SYNERGY

75. Ničić Milica, Božić Dragan COST MANAGEMENT CONCEPT IN GLOBAL CRISIS CONDITIONS

76. Pavlin Samo, Svetličič Marjan HIGHER EDUCATION SYSTEMS, EMPLOYABILITY AND COMPETITIVENESS -

The paper has been previously published in a journal. It is included in the program and only presented at the Conference.

77. Peren Arin K., Helles Peter H., Reich Otto F.M. SHOULD WE CARE ABOUT THE COMPOSITION OF TAX-BASED STIMULUS

PACKAGES?

78. Petković Mirjana, Aleksić Mirić Ana, Petrović Marina INTERORGANISATIONAL RELATIONS, ORGANISATIONAL PERFORMANCE AND

CLUSTER SUCCESS: THE CASE OF AUTOMOTIVE CLUSTER OF SERBIA

79. Pleşco Olga, Tabără Neculai TOURISM EVOLUTION IN TIMES OF CRUNCH

80. Popović Svetlana, Bošković Olgica ECONOMIC DIVERGENCES IN THE EURO ZONE AND THE DEBT CRISIS

81. Praščević Aleksandra GLOBAL ECONOMIC CRISIS AS A MILESTONE IN THE DEVELOPMENT OF

MODERN MACROECONOMICS

82. Prašnikar Janez, Memaj Fatmir, Redek Tjaša, Voje Damjan THE ROLE OF CORPORATIONS IN ECONOMIC DEVELOPMENT: ALBANIA ON ITS

WAY TO INTERNATIONALIZATION

83. Rakita Branko, Mitić Sanja NETWORKING AND CLUSTERING AS CONTEMPORARY STRATEGIES OF

BUSINESS INTERNATIONALIZATION

84. Rikalović Gojko, Knežević Borisav, Mikić Hristina PUBLIC PROCUREMENT IN SERBIA IN THE CONDITONS OF GLOBAL

ECONOMIC CRISIS

85. Rimac Smiljanić Ana, Pepur Sandra FINANCIAL CRISIS, SME FINANCING AND THEIR PERFORMANCE

86. Rossmann Alexander TURNING COMPLAINERS INTO FANS: TOWARDS A FRAMEWORK FOR

CUSTOMER SERVICES IN SOCIAL MEDIA CHANNELS

87. Savić Una ZERO INTEREST RATE POLICY EFFECTS ON THE RELATIONSHIP OF THE

CORPORATE AND RISK-FREE YIELDS

88. Senjur Marjan VOLATILITY, INSTABILITY AND UNCOMPETITIVENESS OF SMALL

MIDLE-INCOME COUNTRIES IN THE EURO AREA

89. Shvab Elena LOGIC AND REGULARITIES OF PROCESSES OF MERGERS AND ACQUISITIONS

IN UKRAINE AND THEIR INFLUENCE ON THE ECONOMIC SITUATION OF THE COUNTRY ON THE EXAMPLE OF COMPANIES OF DAIRY INDUSTRY

90. Šimović Hrvoje, Primorac Marko, Bratić Vjekoslav THE ELASTICITY OF PERSONAL INCOME TAX IN CROATIA

91. Stefanović Jablan Radmila LEAN CONCEPT IN COST MANAGEMENT AS A KEY DRIVER OF COMPANIES’

COMPETITIVE ADVANTAGES

92. Stojanović Žaklina, Ognjanov Galjina MARKETING NOVEL FOOD PRODUCTS IN SERBIA: DO CONSUMERS FIND ANY

USE OF FOOD LABELS?

93. Stucchi Patrizia, Dominese Giorgio EVOLUTION OF EQUITY MARKET RISK DURING THE CRISIS: EUROPE,

AMERICAS AND ASIA

94. Szegál Borisz A. MULTIDISCIPLINARY ANALYSIS OF GLOBAL CRISIS AS FOUNDATION OF

ALTERNATIVE BANKING MODELS

95. Todorovic Miroslav, Pantelić Marija THE SUSTAINABILITY OF FAIR VALUE ACCOUNTING: A BEHAVIORAL VIEW

96. Trifunović Dejan, Ristić Bojan OPTIMALITY OF ENGLISH AND FISRT-PRICE AUCTION IN SERBIAN

PRIVATISATION

97. Trivun Veljko, Silajdžić Vedad, Mahmutćehajić Fatima, Mrgud Mia DUTIES AND LIABILITIES OF BOARD MEMBERS

98. Van Aarlea Bas, Kapplerb Marcus FISCAL ADJUSTMENT IN GREECE: IN SEARCH FOR SUSTAINABLE PUBLIC

FINANCES

99. Višić Josipa THE ANALYSIS OF TAKEOVER EFFECTS ON ECONOMIES OF SCALE: EVIDENCE

FROM CROATIAN TARGET COMPANIES

100. Vujačić Ivan, Petrović Vujačić Jelica THE EU CRISIS AND INSTITUTIONAL REFORM

101. Zafirov Goran PRIVATIZATION AND MARKET LIQUIDITY IN CROATIA AND SERBIA

102. Zarić Siniša OSTROM`S COMMON POOL RESOURCES AND THE THIRD WAY: THE CASE OF

"KRCEDINSKA ADA" (DANUBE ISLAND)

103. Zečević Bojan, Veljković Saša, Đorđević Aleksandar DEVELOPMENT OF TOURISM IN SERBIA DURING GLOBAL ECONOMIC CRISIS

PERIOD

1. Abraham Filip, Studnicka Zuzanna, Van Hove Jan HOW DISTINCT IS DISTANCE?

2. Aćimović Slobodan, Jovović Marija, Mijušković Veljko STRATEGIC OPTIONS FOR FINANCING COMMERCIAL AIRPLANE

PROCUREMENT- REGIONAL IMPLICATIONS

3. Ainsbury Ronald, Pešalj Biljana, Buivys Saulius CORPORATE SUSTAINABILITY AND RESPONSIBILITY AS A SOURCE OF

COMPETITIVE ADVANTAGE – CASE OF VAN HOUTUM COMPANY

4. Ambroziak Lukasz THE IMPACT OF THE ECONOMIC CRISIS ON AN INTRA-INDUSTRY TRADE IN

THE AUTOMOTIVE INDUSTRY IN THE EUROPEAN UNION

5. Arandarenko Mihail, Vladisavljević Marko, Žarković Rakić Jelena FROM INACTIVITY TO WORK: UNLEASHING THE UNTAPPED POTENTIAL OF

THE LABOUR FORCE IN SERBIA

6. Arsić Milojko, Nojković Aleksandra, Ranđelović Saša STRUCTURAL FISCAL DEFICIT IN SERBIA: EMPIRICAL ESTIMATION, CAUSES

AND SOLUTIONS

7. Bande Roberto, Riveiro Dolores PRIVATE SAVING RATES AND MACROECONOMIC UNCERTAINTY: EVIDENCE

FROM SPANISH REGIONAL DATA

8. Bartlett Will, Prica Ivana THE IMPACT OF THE EUROZONE CRISIS ON THE WESTERN BALKANS

9. Batanović Vladan, Guberinić Slobodan, Petrović Radivoj OPTIMIZATION VERSUS SUSTAINABILITY IN ECONOMIC SYSTEMS

10. Bessa Marcelo Facchina Macedo, Nemeth Adam POVERTY AND INCOME INEQUALITY IN NORTHEAST BRAZIL: THE EFFECT OF

FOREIGN TRADE

11. Bogićević Milikić Biljana, Janićijević Nebojša HIGHLIGHTING THE ROLE OF TRANSITION PROCESS IN SHIFTING THE FOCUS

OF THE HRM FUNCTION IN SERBIA

12. Bozdo Anilda, Tarka Viola BANKING SYSTEM FACING GLOBAL FINANCIAL CRISIS AND BANK OF

ALBANIA PROTECTION ROLE

13. Bratina Borut, Jovanovič Dušan, Bratina Miha, Virag Luka SHAREHOLDERS´ DUTY TO PERFORM REHABILITATION MEASURES

14. Bucevska Vesna, Bucevska Jasmina ESTIMATING AND FORECASTING STOCK MARKET VOLATILITY UNDER CRISIS:

EMPIRICAL EVIDENCE FROM THE MACEDONIAN STOCK EXCHANGE

15. Cerović Božidar, Nojković Aleksandra GROWTH AND INSTITUTIONS: POLITICAL AND CIVIL LIBERTIES AS A FACTOR

OF GROWTH IN TRANSITION ECONOMIES

16. Chatelain Jean-Bernard, Ralf Kirsten THE FAILURE OF FINANCIAL MACROECONOMICS AND WHAT TO DO ABOUT IT

17. Cingula Domagoj, Cingula Marijan MONETARY AND FISCAL POLICY WITH STRONG SOCIAL COMPONENT – A

DIFFERENT PATH TO GROWTH

18. Cuénoud Thibault EURO AREA DREAM, WHICH OPPORTUNITY TO REDEFINE POLICY

COORDINATION?

19. Dobardžić Eldin INTERACTIONS BETWEEN STOCK MARKET AND FOREIGN EXCHANGE

MARKET:THE CASE OF SERBIA

20. Draganac Dragana, Marjanović Milica DETERMINING THE RELIABILITY AND STABILITY OF BETA COEFFICIENT AS A

SYSTEMATIC RISK MEASURE IN CAPM

21. Dragutinović Mitrović Radmila, Bjelić Predrag EU ENLARGEMENT AND BILATERAL TRADE: The evidence from West Balkan

and CEE countries

22 Družić Ivo, Andabaka Badurina Ana, Gelo Tomislav FISCAL IMPACT ON EUROPEAN UNION MACROECONOMIC PERFORMANCE

23. Đukić Đorđe, Vasić Vladimir ANALYZING BEHAVIOR OF MOST TRADED SHARE PRICES ON BELGRADE

STOCK EXCHANGE BY APPLYING TRANSFER FUNCTION PROCEDURE

24. Đumić Slavko, Gligorić Lidija E-COMMERCE AND POSTAL SERVICES

25. Estrin Saul, Uvalić Milica FOREIGN DIRECT INVESTMENT IN TRANSITION ECONOMIES. ARE THE

BALKANS DIFFERENT?

26. Fabris Nikola, Žugić Radoje THE IMPACT OF STRUCTURAL CHANGES IN THE ECONOMIC SYSTEM ON

SELECTED DEMOGRAPHIC AND OTHER CHARACTERISTICS OF MONTENEGRO`S POPULATION

27. Filipović Jelena FREQUENCIES OF USE OF DIFFERENT ONLINE TOOLS ACCORDING TO USER’S

MOTIVATIONS

28. Gabrisch Hubert AGAINST THE WALL: EU GOVERNANCE REFORMS

29. Glišović Nataša, Almeida Ribeiro Rita, Milenković Miloš, Bojović Nebojša, Petrović Vladeta

A SA-BASED SOLUTION PROCEDURE FOR FUZZY TIME-COST TRADEOFF

30. Göktaş Deniz, Özer Mustafa EFFICIENCY OF REGIONAL INNOVATION SYSTEMS: KNOWLEDGE

PRODUCTION FUNCTION APPROACH TO TURKISH REGIONS

31. Grubišić Zoran, Hanić Hasan RELATIONSHIP BETWEEN TWIN DEFICITS, EXTERNAL DEBT AND T-BILLS

YIELD IN SEE COUNTRIES

32. Hadžić Fikret, Avdić Armin COMPARATIVE ANALYSES OF BUSINESS PERFORMANCES FOR METAL

INDUSTRY SECTOR IN BOSNIA & HERZEGOVINA, GERMANY AND CZECH REPUBLIC, USING BENCHMARKING METHODOLOGY

33. Hadžić Fikret, Prolaz Melisa THE ROLE OF REGULATORY AUTHORITIES IN THE GLOBAL FINANCIAL CRISIS

– NEW REGULATORY CHALLENGES AND RECOMMENDATIONS

34. Hajiyev Ramil COVERED BONDS AS A NEW FINANCIAL INSTRUMENT FOR AZERBAIJAN

CAPITAL MARKET

35. Hallett Andrew Hughes, Richter Christian HAS THE FINANCIAL CRISIS CHANGED THE BUSINESS CYCLE

CHARACTERISTICS OF THE GIPSI COUNTRIES?

36. Hölscher Jens, Nulsch Nicole, Stephan Johannes MODERNISATION OF STATE AID CONTROL IN THE ENLARGED EUROPEAN

UNION: THE FIRST DECADE

37. Hristova Snezana, Klisarovska Elena DESIGNING PUBLIC-PRIVATE PARTNERSHIP IN MACEDONIA: DESIGNING

CRISIS-RESILIENT STRATEGY

38. Ivanović Maja ESTIMATION OF MACROECONOMIC AND BANK-SPECIFIC DETERMINANTS OF

THE QUALITY OF LOANS IN MONTENEGRO

39. Jakšić Miomir SUSTAINABLE MACROECONOMIC POLICY AND GOOD GOVERNANCE: CASE OF

SERBIA

40. Janković Irena, Inđić Drago THE EUROZONE SOVEREIGN DEBT CRISIS AND RESTRUCTURING

ALTERNATIVES

41. Janković Milan, Matavulj Ljiljana THE IMPACT OF THE NATIONAL BROADBAND NETWORK ON THE ECONOMIC

GROWTH IN THE REPUBLIC OF SERBIA

42. Jevđović Gordana GROWTH-FRIENDLY TAX SYSTEM

43. Joksimović Ljubinka THE DETERMINANTS OF FISCAL CONSOLIDATION IN SOUTHEASTERN

EUROPEAN COUNTRIES

44. Jotanović Vera MECHANISMS OF THE LAST FINANCIAL CRISIS OF 2007: WHAT ARE THE

LESSONS LEARNED?

45. Jovanović Branimir HOW POLICY ACTIONS AFFECT SHORT-TERM POST-CRISIS RECOVERY?

46. Jovanović Gavrilović Biljana, Gligorić Mirjana, Molnar Dejan THE IMPORTANCE OF THE QUALITY OF ECONOMIC GROWTH IN THE SEARCH

FOR A WAY OUT OF THE CRISIS

47. Jovanović Mario POLITICAL INFLUENCE ON GERMAN BANKING SUPERVISION AND ITS IMPACT

ON ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM SURVEY DATA

48. Karadžić Vesna, Backović Vulić Tamara MONTENEGRIN CAPITAL MARKET CHARACTERISTICS BASED ON FINANCIAL

TIME SERIES ANALYSIS

49. Kiss Gábor Dávid, Ács Attila COMMON CURRENCY FOR CENTAL-EASTERN EUROPEAN COUNTRIES?

50. Knežević Vladan, Đeković Zoran COST MANAGEMENT OF NETWORK INDUSTRIES IN ECONOMIC CRISIS: A

CASE OF POSTAL SERVICE PROVIDERS

51. Kočović Jelena, Rakonjac Antić Tatjana, Jovović Marija EFFECTS OF PRIVATIZATION MODEL OF INSURANCE MARKET IN TRANSITION

ECONOMIES

52. Končar Jelena, Stanković Ljiljana PRIORITIES FOR THE FURTHER DEVELOPMENT OF CONSUMER PROTEC-TION

IN REPUBLIC OF SERBIA

53. Kordić Lana, Arnerić Josip DIFFERENCES IN THE EFFICIENCY OF VARIOUS HEALTH CARE PROVIDERS IN

CROATIA

54. Kovačević Radovan THE INFLUENCE OF THE GLOBAL FINANCIAL CRISIS ON THE BALANCE OF

PAYMENTS OF SERBIA

55. Koyama Yoji ALBANIA’S WAY TO EU ACCESSION AND HER CHALLENGES

56. Kozomara Jelena ROLE OF NON-EQUITY MODES OF INTERNATIONAL PRODUCTION IN SERBIAN

EXPORT STRATEGY

57. Krešo Sead, Karamujić M. H., Begović Selena THE GLOBAL FINANCIAL CRISIS (GFC) AND THE CHANGE OF SUPERVISION

FOCUS

58. Krstić Gorana LABOUR FORCE FLOWS AND INFORMAL ECONOMY IN SERBIA

59. Laušev Jelena THE EFFECT OF AUSTERITY MEASURES ON PUBLIC-PRIVATE SECTOR WAGE

GAP IN HUNGARY

60. Lokar Alessio, Bajzikova Lubica RECENT EUROZONE PROBLEMS FROM THE POINT OF VIEW OF LOCAL

BANKING SYSTEMS

61. Lovreta Stipe, Stojković Dragan THE NEW ROLE OF TRADE IN OVERCOMING THE ECONOMIC CRISIS AND

BUILDING MODERN MARKET ECONOMY

62. Lovrinović Ivan, Nakić Martina TRENDS IN FOREIGN EXCHANGE RESERVES STRUCTURING AND

MANAGEMENT WITH SPECIAL REFERENCE TO CROATIA

63. Lovrinović Ivan, Ćorić Tomislav, Nakić Martina BASE MONEY CREATION CHANNELS UNDER INSTABILITY

64. Maček Anita, Ovin Rasto ARE CAPITAL CONTROLS APPROPRIATE FOR PROTECTION OF THE STRATEGIC

INDUSTRIES? EVIDENCE FROM EUROPE

65. Mateljak Željko, Bilić Ivana DOES TYPE OF ORGANIZATIONAL STRUCTURE AFFECT ORGANIZATIONAL

PERFORMANCES? CASE STUDY OF CROATIA

66. Mihanović Damir THE EFFECT OF QUALITY MANAGEMENT SYSTEM ON MANAGERIAL PRACTICE

OF MAJOR CROATIAN COMPANIES

67. Mijatović Eva ACCOUNTING FOR BUSINESS COMBINATIONS

68. Miletić Snežana, Radić Siniša FAIR VALUE, ECONOMIC CRISIS AND INFORMATION RISKS: THE CHALLENGES

OF MEASUREMENT OF ASSETS OF VARIOUS LIQUIDITY

69. Miljak Toni IMPACT OF ECONOMIC CRISIS ON THE LIQUIDITY OF COMPANIES IN FOOD

INDUSTRY: EMPIRICAL RESEARCH IN CROATIA

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PERIOD

From Global Crisis to Economic Growth. Which Way to Take?

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THE ELASTICITY OF PERSONAL INCOME TAX IN CROATIA

Hrvoje Šimović, PhD1 [email protected]

Marko Primorac, MA2 [email protected]

Vjekoslav Bratić, PhD3 [email protected]

Abstract: This paper examines the elasticity of personal income tax (PIT) in Croatia. The main hypotheses of the paper are that there is an unequal tax treatment of different sources of income and that the financial crisis significantly affected elasticity of PIT in Croatia. The main goal of the paper is to analyze the elasticity of PIT according to the sources of income, as well as the changes in elasticity before and during the economic crisis. In order to confirm the hypotheses and achieve given goals, the paper is corroborated with an empirical analysis for the period 2001-2010. An assessment of PIT elasticity according to the sources of income in relation to adequate base,i.e. total income, was made for that period.Methodology includes econometric approach in the assessment of short-term PIT elasticity in the period 2001-2010 and the calculation of dynamic elasticity for the period 2005-2010. Elasticity is calculated for total PIT in general and separately for each source of income. Research results reveal an unequal treatment of different sources of income and inconsistent development of personal income tax system in Croatia (PIT is predominantly focused on the taxation of employment income). The economic crisis has had a significant impact on the total taxable income and the collected PIT, as well as on the PIT elasticity in regard tototal income.

KEY WORDS: PERSONAL INCOME TAX, TAX ELASTICITY, SOURCES OF INCOME, CROATIA

1. INTRODUCTION

Effects of the global economic crisis are still in full effect and its grasp is now spreading intensively through economic sectors which only appeared to be immune. After spillovers from the financial sector to the real sector, lately, the crisis has been evident in the public sector as well causing political instability and distortions of international relations in countries with associated economies (e.g. European Union). Economic and political instability frequently lead to unfavorable investment grades and an increase in borrowing costs for countries in crisis. With the goal of eliminating these negative events, economists are trying to influence financial stability of affected countries with different methods, primarily in the scope of fiscal policy. One of the instruments consistently used for this goal are taxes. The effect of the global economic crisis is visible in Croatia’s public finances as well. The Government is for some time now trying, more or less successfully, to provide efficient solutionsin order to insure continuity in government revenue with minimal opportunity costs and discontent of the citizens. Aforementioned solutions, in the sphere of taxation, are mostly carried out through consumption tax (VAT) and income tax.

This paper analyzes elasticity of PIT in Croatia with a special overview of changes in elasticity due to global economic crisis. The main hypotheses of the paper are that there is an unequal tax treatment of different sources of income and that the financial crisis significantly affected elasticity of PIT in Croatia. The main goal of the paper is to analyze elasticity of PIT according to the sources of income, as well as the changes of elasticity before and during the economic crisis. In order to confirm the set hypotheses and achieve given goals, the paper is corroborated with an empirical analysis for the period 2001-2010. An assessment ofPIT elasticity according to the sources of income in relation to adequatetax base, i.e. total income, was conducted for that period.

The paper has six sections. The second section describes characteristics of PIT in Croatia. The third gives an overview of effects of the economic crisis on the tax base and collected personal income tax and surtax. The fourth section specifies methodology and data used for the empirical research. Results of the research are interpreted in the fifth section, and the last section is the conclusion.

1 Faculty of Economics and Business, University of Zagreb 2 Faculty of Economics and Business, University of Zagreb 3The Institute of Public Finance, Zagreb

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2. CHARACTERISTICS OF PERSONAL INCOME TAX IN CROATIA

Personal income tax, besides being an important fiscal instrument for collecting government revenue, has a considerable social – redistributive role. A quality tax system ought to be efficient as well as horizontally and vertically equitable. Vertical equity demands that those who can pay more tax (those who are richer) sustain the greater tax burden compared to those who cannot pay more (the poorer). PIT in Croatia is a fundamental form of taxation and its progressivity is used for introducing greater equality in the tax system and diminishing the regression of consumption tax and social security contributions (Kesner-Škreb et al., 2001). Although it may seem that the main determinant of the tax system progressivity are increasing tax rates, its progressivity (or regression) is significantly determined by the scope of the tax base as well as the tax reliefs.

Croatian tax system, and especiallyPIT, has been altered numerous times, what makes its long-term study somewhat difficult. Tax brackets, personal allowance, scope of the tax base and tax reliefs as well as the tax system orientation in general have been modified quite frequently. Income Tax Act in Croatia has been altered 14 times in the last 18 years (whereas 3 out of 14 times the complete new Act was introduced), and the concept of taxation was changed several times. Comprehensive (synthetic)PITwhich coverstotal incomefrom different sources has been introduced in 1994 with the Income Tax Act(OG 109/93). Aforementioned system was abolished in 2001 with the introduction of the second Income Tax Act(OG 127/00).It was replaced with an analytic PIT system which separately taxes incomes from different sources. Advanced payments are determined by special (different) tax rates according to the sources of income, whereas advanced payments paid during a given tax period are considered tax payer’s final tax due. Also, filing of an annual tax return became obligatory only for self-employment income taxpayers. Abolishment of obligatory annual tax returns also meant the abolishment of the basic concept of a comprehensive PITand weakening of the horizontal equity which demands equal taxation of same-sized incomes.

In 2005 the third Income Tax Act(OG 177/04) was introduced and has already experienced four modifications (OG 73/08, 80/10, 114/11, 22/12). According to the Law, taxable income is considered to be: income from employment; income from self-employment (self-employed people, freelance occupations); income from assets and property rights (rental and lease fees, copyrights); income from capital (interest, withdrawals of assets by company owners for their personal needs, dividends and profit sharing); income from insurance; and receiptsfrom other income. Different tax treatment of sources of income established analytic PIT system, and numerous alterations in the definitions of tax base and taxable sources of income, as well as the number and types of reliefs greatly determine horizontal and vertical equity.

The structure of the tax burden according to the sources of income has not changed significantly, although changes in the PIT increased the tax burden on income from employment. What follows is the analysis of the structure of PIT and surtax paid. It can be observed in Figure 1 that the share of PIT from employment has risen notably compared to other sources of income, from 81.4% in 2001 to 89.2% in 2010. Next to the employment income, PIT from self-employment and from other incomehave significant shares in the structure of total PIT. Both of thesetypes of income represent income received from work (labor). It is worth mentioning that other income, which used to be a part of the self-employment income,became a separate category (source of income) in 2005.


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Figure1.Structure of PIT and surtax according to the sources of income for the period 2001-2010

Annotation: Due to aggregated data, surtax will be observed jointly with personal income tax

Source: Ministry of Finance, Reports on PIT and surtax according to the numeric classification of taxes for the period 2001-2010, adapted by authors

Other sources of income (Figure 1) comprise of incomes which are not acquired actively (from work), but passively. Those include income from assets and property rights, income from capital and income from insurance. Their share, which varies in the observed period between 1.8 and 2.5%, is thus almost negligible.

3. THE EFFECT OF THE ECONOMIC CRISIS ON THE TAX BASE AND THE SIZE OF PIT

This part of the paper examines the effect of the economic crisis on the tax base and the amount of PIT collected. As Croatian tax system is hard to analyze due to frequent modifications of the Law, trends in the total income and in revenue from PIT and surtax for different types of income are observed from 2005 (when the last Income Tax Act was introduced) to 2010. By observing the tax base (employment income, self-employment income and agricultural income) and tax revenue trends (revenue from employment, self-employment, other income and other sources cumulatively) it can be concluded that the effect of the economic crisis on the aforementioned variables is incontestable.

Total income in the period under observation increased from 2005 to 2008 and then lessened in 2009 and 2010 (Figure 2), but the effect of economic crisis was not uniform. Agricultural income diminished first (in 2007), following with self-employment income in 2009, whereas employment income decreased last, in 2010.

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Figure 2.Income trends 2005-2010 (in billions of HRK)


In compliance with the total income trends, revenue from PIT and surtax increased from 2005 to 2008, and then decreased (Figure 3). While the financial crisis had an asymmetric effect on various sources of income, tax revenue from all sources of income peaked in 2008 and diminished afterwards (except for the category ‘other’ which includes taxes from assets and property rights, capital and insurance, but considering its small share in the total PIT revenue, this is not very relevant).

Apart from the volatility of taxable income, fluctuations in tax revenue in the observed period could have been affected by legislative modifications as well. Particularly those in July 2010 (OG 80/10), when the additional personal allowance was abolished and changes in the number of tax rates and tax brackets were introduced. The effect of the economic crisis – direct or indirect (due to the tax law modifications that emerged as a response to the crisis) – on the progressivity (elasticity) of PITis analyzed in the following sections. To gain a complete insight into the potential effect we first assessPIT elasticity according to the sources of income in the period 2001-2010.


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Figure 3.PIT revenue trends 2005-2010 (in billions of HRK)


4. METHODOLOGY AND DATA

There are several measures of the tax system progressivity which can be divided into the distributional progressivity indexes and the structural indexes (Kiefer, 1984). Structural indexes are focused on the measure of tax elasticity, whereas distributional progressivity indexes reflect (ir)regularity in income distribution before and after taxation and in tax burden distribution. Musgrave & Thin (1948), Kakwani (1976)andSuits (1977)developed progressivity indexes which were mainly based on different combinations of Gini coefficients. Standard coefficients of tax elasticity, which can be calculated with basic arithmetic operations, are often used in literature (Kesner-Škreb et al., 2001).

PIT elasticity can be defined as the change of the tax revenue as a result of the unit change in income, or more precisely, as a ratio of the percentage change in tax revenue and percentage change in taxable income. Although there are an inexhaustible number of methodsfor calculating tax elasticity, Johnson & Lambert (1989)point to four methods: the regression approach, the exact calculation method, the linear Pareto model and the simulation method. Considering numerous modifications of the Income Tax Act in the observed period (2001-2010), application of standard elasticity coefficients would notreflect changes in the PIT structure within a year, nor the cyclical sensitivity to changes in total income. Therefore an econometric evaluation (regression approach) is used for the calculation of PIT elasticity in the period 2001-2010.

Elasticity coefficientsare calculated for total PIT and for different sources of income. For the calculation of short-term elasticity coefficientsthe regression model was developed, i.e. Error Correction Model (ECM), as far as the variables are of the same order of integration and there is a cointegration relationship between them:

(1)

where stands forPIT and surtax, income, π parameter of long-termadjustment, and λ short-term elasticity of PIT. If the variables are not cointegrated, the following model is assessed:

(2)

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In order to identify the effect of the economic crisis on the PITelasticity (considering the restrictive time series due to a relatively narrow observationperiod), econometric analysis proved to be inefficient and was thus replaced with the coefficient of dynamic elasticity:

(3)

where stands forelasticity, PIT and surtax, and income.

Empirical analysis was based on the aggregate PIT and surtax data according to the numeric classification published by theCroatian Tax Administration (Ministry of Finance) and the Croatian Bureau of Statistics’ data on employment and income. Dependent variable is monthly advance payments of tax and surtax4 (for total PIT and for different sources of income). Due to an increase in the number of sources of income in the observed period, the affiliation of several types of income was altered (e.g., a large share of the PITused to be a part of the self-employment income tax up to 2005, and was reclassified to other income tax thereafter). In the empirical part of the analysis, time series were adjusted to the actual classification, i.e. six sources of income are examined.

Taxable income, as an independent variable, is estimated with the Croatian Bureau of Statistics’ dataas a product of the number of employees and average gross wage. Total income from self-employment is obtained as the product of the number of self-employed people in certain sectors according to the national classification of economic activities and average gross wage in corresponding sectors. The product is then added to the estimatedtotal income of active farmers. Due to a lack of data for estimatingthe total income from other sources of income, total income(as the sum of estimated income from employment and self-employment) is used as an independent variable for estimating the other income tax elasticity.

Time series used in the econometric analysis are seasonally adjusted and converted into logarithmic form.

Order of integration for analyzed time series was tested with the application of the unit root test (see Appendix 1 for the simplified results of the ADF test).

5. RESULTS

Cointegration relationship between total PIT, employment income tax and tax from assets and property rights and their corresponding macroeconomic bases was determined for the period 2001-2010.5The absence of the long-term correlation between certain categories of income tax and taxable income points to inconsistent income tax policy, especially when it comes to horizontal equity. Table 1 presentsestimated parameters of short-term tax elasticity according to the sources of income, as well as the total PIT in regard to adequatemacroeconomic base. The fact that not all results are statistically significant indicates an unequal treatment of six sources of income and an inconsistency of results in the observed period.

Results show that the tax policy is consistent only when it comes to taxation of employment income, which is of similar progressivity as the total PIT. Estimated progressivity of 1.78 (for the period 2001-2010) of the entirePIT system can be considered a reliable score.

4 Due to aggregated data, empirical part of the analysis will observe surtax jointly with the personal income tax. 5 See Appendix 2 for the results of the ADF test for the residuals of cointegration equation.


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Table 1.Short-term tax elasticity according to the sources of income

Elasticity coefficient

R2 σ F-stat. [prob.] N

Personal income tax: 2001-2010From employment 1.31***(4.10) 0.31 0.048 36.1[0.00] 119 From self-employment 2.41*(1.93) 0.03 0.215 3.73[0.05] 119 From assets and property rights 2.49**(2.25) 0.40 0.190 39.9[0.00] 119 From capital 3.79 (0.98) 0.00 0.662 0.97[0.32] 119 From insurance 7.51(0.69) 0.00 1.856 0.48[0.48] 119 From other income 2.23*(1.95) 0.03 0.197 3.82[0.05] 119 Total PIT 1.78***(4.02) 0.40 0.075 39.8[0.00] 119

Annotation: *** p<0.01, ** p<0.05%, * p<0.10%; t-statistics is given in brackets; all results are tested for autocorrelation (no statistically significant autocorrelation of any order exists in the observed models)

Source: authors

Tax elasticity of other sources of income is mostly higher than those of the employment income tax, which is not in compliance with the assumptions. These results have to be interpreted carefully because in most of these cases significance is weaker (5% or 10%) and these tax revenues make up a small part of the total tax revenue. Still, aforementioned results attest the researchhypothesis as they show unequal tax treatment of different sources of income, thus distorting the horizontal equity. Also, numerous modifications and addendums of the legislation did not positivelyreflect on equity as well.

Table 2.Coefficients of dynamic PIT elasticity according to the sources of income

Year Total Employment Self-employment Other income 2005/2006 1.68 2.19 -1.86 -0.422006/2007 1.80 1.71 0.40 0.982007/2008 0.71 0.82 0.13 0.322008/2009 5.46 -2.09 0.92 2.612009/2010 1.89 1.87 0.57 1.36

Annotation: Elasticity of total PIT and tax from other income was calculated in relation to changes in total income of employed people, self-employed people and farmers; elasticity of employment income tax in relation to changes in employment income; and elasticity of self-employment income tax in relation to changes in total income of self-employed people and farmers

Source: authors

Considering the relative share of PIT revenue according to the sources of income as well as the lack of data onthe tax base of income from assets, capital and insurance tax, isolated (individual) effect of economic crisis on the elasticity of PIT is estimated only for employment income, self-employment income, other income and aggregately for total income (which includes incomes from all six sources) for the period 2005-2010.

The elasticity of total PIT in the observed period ranges from the lowest 0.71 in 2007/2008 to the highest 5.46 for 2008/2009. Results confirm the progressivity of total PIT, and calculated coefficients can be compared with the results of PIT system progressivity obtained from the econometric analysis (Table 1). This statement holds for all observed years (Table 2) except for aforementioned extreme values which are probably caused by the crisis. In the period 2007/2008 the progressivity of PIT significantly diminished (for all sources of income), only to be followed with a sudden growth in 2008/2009 (except for employment income). Elasticitycoefficients stabilized in 2009/2010 when elasticity of total PIT reached 1.89. This means that, on average, a 1% increase in the tax base (total income) caused a 1.89% growth of PIT and surtaxpaid, implying the progressivity of the PIT system in Croatia in the observed period. Negative elasticity coefficient of employment income in 2008/2009 was induced by a decrease in PIT paidin 2009 compared to 2008, whichoccurred in spite of an increase in total taxable income.

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6. CONCLUSION

The PIT system in Croatia is rather unstable. Frequent changes of tax brackets, personal allowances, scope of the tax base and tax reliefs, as well as the taxation concept itself are inherent. At the moment, analytic system of PIT taxation is applied. It classifies six sources of income, all of those taxed separately. Croatian PIT system is mostly based on taxation of employment income. Although the advocates of consumption concept donot see this as disputable, the advocates of income concept consider this system inequitable. Every income, regardless of its source, should have the same tax treatment. It can be concluded that, because of the aforementioned reasons, implementation of horizontal and vertical equity in Croatia in the context of PIT is formidable.

The results of the empirical analysis point to the progressivity of PIT. The calculation of progressivity is fairly reliable only for taxation of employment income and for total personal income. Economic crisis reflected greatly on the PITbase (total income) and the PIT and surtaxcollected. As opposed to taxable income from various sources, which the financial crisis has hit with an uneven dynamics, tax revenue consecutively peaked in 2008, to be followed with a decrease thereafter. Dynamic PITelasticity in the period 2005-2010is mostly comparable with the results of elasticity estimation obtained from the econometric analysis. Significant changes appear in the period 2007-2009 when the tax base and collected tax revenue trends are unbalanced and uneven, partially due to the economic crisis.During crisis, government introduced many discretionary measures regarding diminishing number of tax brackets, changing tax rates and many reliefs. Those changes disturbed relatively constant elasticity of PIT system and integrity of PIT in Croatia, levying more tax burden on employment income than other incomesources.

REFERENCE LITERATURE

Engle, R. &Granger, C. (1987), “Cointegration and Error Correction: Representation, Estimation and Testing” Econometrica,55(2), 251-276.

Engle, R.F. &Yoo, B.S. (1987), “Forecasting and Testing Cointegrated Systems” Journal of Econometrics, 35(1), 143-159.

Johnson, P.& Lambert, P.J. (1989), “Measuring the Responsiveness of Income Tax Revenue to Income Growth: A Review and some U.K. Values” Fiscal Studies, 10(1), 1-18.

Kakwani, N.C. (1976), “Measurement of Tax Progressivity: An International Comparison” The Economic Journal, pp. 71-80.

Kesner-Škreb, M. &Madžarević-Šujster, S. (2004), “Income Tax Progressivity in Croatia (1995-2002)”Zagreb International Review of Economics and Business, 7(1), 81-101.

Kesner-Škreb, M., Kuliš, D., Mađareviš-Šujster, S. &Arbutina, H. (2001), “Progresivnostporezanadohodak u Hrvatskoj u razdoblju od 1995.do 1999. godine” Financijskateorijaipraksa, 25(2), 139-260.

Kiefer, D.W. (1984), “Distributional Tax Progressivity Indexes”National Tax Journal, 37.

Musgrave, R.A. & Thin, T. (1948), “Income Tax Progression, 1929-48”Journal of Political Economy, pp. 498-514.

Suits, D.B. (1977), “Measurement of Tax Progressivity” American Economic Review, 67.

** Income Tax Act(Official Gazette 109/93, 95/94, 106/96, 164/98, 33/00).

** Income Tax Act(Official Gazette 127/00, 150/02, 163/03, 30/04).

** Income Tax Act(Official Gazette 177/04, 73/08, 80/10, 114/11).


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APPENDICES

Appendix 1.Summary of ADF testresults

Tax according to the sources of income: Order of integration:

From employment I(1)

From self-employment I(0)

From assets and property rights I(1)

From capital I(1)

From insurance I(0)

From other income I(0)

Total personal income tax I(1)

Base:

Total income from employment I(1)

Total income from self-employment I(2)

Total income I(1)

Annotation: Detailed results of the ADF test are available upon request.

Source: authors

Appendix 2. ADF test resultsfor the cointegration equationresiduals

Income tax and surtax from:

Base: ADF test N

From employment Total income from employment

-5.26*** 119

From assets and property rights

Total income -8.50*** 119

From capital Total income -2.19 119

Total income tax and surtax

Total income -8.79*** 119

Annotation: *** p<0.01, ** p<0.05%, * p<0.10%; ADF test for residuals was performed without including a constant or a time trend (based on Schwarz criterion). Critical values for cointegration test were determined according to Engel &Yoo (1987)

Source: authors

the first and the one - ruđer bošković institute...contents 1. abraham filip, studnicka zuzanna,...

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