The study also presents insights into the incentives needed to encourage the voluntary association of local government units (LGU) for the common provision of certain functions and public services based on international practice. The findings build on the previous analysis, conducted through the Fiscal Decentralization in Croatia report.
Croatia’s high degree of municipal fragmentation has been consistently recognized as one of the main challenges to its intergovernmental fiscal system. This trend is also present globally and is characterized by a relatively large number of local governments with populations too small to take advantage of economies of scale in the delivery of public services, a lack of administrative capacity and specialized resources, and/or low tax bases and revenue potential. In Croatia, this has had negative consequences for the financing system, the efficient supply of local public goods and services, as well as the quality and quantity of services provided to local communities.
In this context, the report looks at international practices, experience, and trends in addressing local government fragmentation and capacity shortcomings from Europe and OECD countries. Based on the international examples and considering local economic, social, and political contexts, the report proposes meaningful reform options. These lessons can complement already existing reform efforts by Croatian authorities and pave the way forward for further targeting of the policy mix and complementary measures that build independent, effective, and sustainable local governments, leading to optimal local service delivery across the country.
Municipal Mergers and Associations: International Experience and Reform Options for Croatia (download pdf) | Available also in Croatian (download pdf)