NAŠE GOSPODARSTVO / 
OUR ECONOMY

Fiscal Capacities of Large Cities in Croatia – Financial Support for Smart Cities

Sabina Hodžić, Hana Paleka

Abstract


In a dynamic market, the city has become a main source of competitiveness, along
with financial and economic benefits. Due to the processes of digitalization, a
new concept has been developed, namely smart cities. This concept delivers
economic and financial potential, not only to cities, but also to urban and local
economic development. Therefore, to ensure the establishment of this concept,
local government units, i.e., cities, need to have enough financial resources.
In addition, the fiscal capacity of their local budgets should be sufficient. The
objective of this paper is to evaluate the fiscal capacity of large cities in Croatia
over the 2016-2018 period, as well as to present the financial support through
funding schemes for the establishment of smart cities. After calculating the level
of fiscal capacity of large cities, the analysis revealed interesting results. Only four
large cities (Split, Rijeka, Zadar and Pula) achieved positive fiscal capacity in the
observed period. This provides evidence of fiscal performance and fiscal capacity
for the establishment of smart cities. This concept will enhance the quality of life,
stimulate economic growth, sustain local government budgets and create new
value for both investors and the local population.


Keywords


local government, smart cities, fiscal capacity, local economic development

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