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ECONOMIC POLICY AND UNOFFICIAL ECONOMY IN TRANSITION: THE CASE OF ...

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Topic: Economic Policy

Sort Desciption: Connections Between the Unofficial Economy and Economic Policy ... of the unofficial economy and it wishes to reduce it economic policy must be directed ...

Content Inside: ECONOMIC POLICY AND UNOFFICIAL ECONOMY IN TRANSITION: THE CASE OF CROATIA by Katarina Ott Institute of Public Finance HR-10000 Zagreb Katanieva 5 P.O.Box 320 Croatia Tel: +385 1 433 006 4819363 Fax: +385 1 4819365 e-mail: kott@ijf.hr Paper for the international conference to be held in Bled Slovenia in September 1998 4 ECONOMIC POLICY AND UNOFFICIAL ECONOMY IN TRANSITION: THE CASE OF CROATIA by Katarina Ott Summary Research of the unofficial economy in Croatia has shown that the trends may have been influenced by both structural conditions (impoverishment increased inequality unemployment and lowering of the level of public services) and by institutional changes (privatisation taxation policy and sanctioning). A special problem in Croatia’s unofficial economy is its form in privatisation due to: a) the amount of social capital in the process of privatisation; b) the impossibility to measure the unofficial economy in privatisation; c) the attitude towards the revision of privatisation as a political and not an economic or legal question; d) the non-transparency of regulations and rules and the concentration of decision making powers in the hands of state officials (non-existent public control appearance of state clientelism etc.) Inadequate penalties against those active in the unofficial economy in Croatia has resulted in public apathy and cynicism toward the legal functioning of the state and politicians. This will make efforts to control the unofficial economy more difficult. Any economic policy directed towards prevention of the unofficial economy must: 1) reduce taxes and customs tariffs (as much as the state budget can take); 2) selectively reduce regulation; 3) reduce the role of the public sector (or the state) in the economy; 4) encourage evaluation of the share of the unofficial economy in the economy as a whole and in specific economic activities. The following measures should be taken: 1) explanation specification and co- ordination of re ...

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