Abstract The subject of this paper is the analysis of the classification of economic systems. The traditional classifications of capitalist, socialist centrally planned, and socialist market systems, and the newer classification of variants of capitalism into the Anglo-Saxon, European continental, and Asian models, are inadequate to explain new phenomena in a globalized economy. After the collapse of central planning, countries in transition became a category describing processes of deep socio-economic transformation. These transition countries aspired to meet the standards of developed European market economies, as well as governance standards regarding democracy, human rights, and the rule of law. A new classification of economic systems by Balcerowicz (2014) combines the traditional classification of economic systems with the characteristics of well-governed democratic societies in order to come up with a matrix that shows the interaction of economic system characteristics and governance outcomes.This paper builds on Balcerowicz’s classification by introducing and delineating the categories of state capitalism, crony capitalism, and state capture in order to provide a new classification of economic systems. It uses these concepts to empirically analyze the transition countries, with special reference to states aspiring to EU membership and the new EU member states. The methodology used is analytical and empirical. The results find that the transition is incomplete, especially in terms of governance, leading to the hypothesis of a ‘mid-transition trap’, similar to the much discussed ‘middle-income trap’. The results should lead to further, more refined research.
{"title":"Incomplete Transition – Is there a “Mid-Transition Trap”?","authors":"I. Vujačić, Jelica Petrović-Vujačić","doi":"10.2478/zireb-2020-0023","DOIUrl":"https://doi.org/10.2478/zireb-2020-0023","url":null,"abstract":"Abstract The subject of this paper is the analysis of the classification of economic systems. The traditional classifications of capitalist, socialist centrally planned, and socialist market systems, and the newer classification of variants of capitalism into the Anglo-Saxon, European continental, and Asian models, are inadequate to explain new phenomena in a globalized economy. After the collapse of central planning, countries in transition became a category describing processes of deep socio-economic transformation. These transition countries aspired to meet the standards of developed European market economies, as well as governance standards regarding democracy, human rights, and the rule of law. A new classification of economic systems by Balcerowicz (2014) combines the traditional classification of economic systems with the characteristics of well-governed democratic societies in order to come up with a matrix that shows the interaction of economic system characteristics and governance outcomes.This paper builds on Balcerowicz’s classification by introducing and delineating the categories of state capitalism, crony capitalism, and state capture in order to provide a new classification of economic systems. It uses these concepts to empirically analyze the transition countries, with special reference to states aspiring to EU membership and the new EU member states. The methodology used is analytical and empirical. The results find that the transition is incomplete, especially in terms of governance, leading to the hypothesis of a ‘mid-transition trap’, similar to the much discussed ‘middle-income trap’. The results should lead to further, more refined research.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"57 - 71"},"PeriodicalIF":0.6,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46946258","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The R&D processes generate knowledge and enhance innovation activity. Knowledge and ideas developed by one agent may spill over to and can be used for economic and acquired by other agents. The results of these processes are known as the R&D spillover effects. Factors, that have influence on innovation diffusion, and determine the place of the R&D spillovers in knowledge-based economy have been investigated in the article. The definition and types of knowledge have been examined. The relationship between the R&D cooperation, different types of knowledge, knowledge spillovers and innovation have been traced. The main objectives of the paper are to consider the concept of the R&D spillovers and connection between different types of knowledge and the R&D spillover effects. Systematic comparative analysis, synthesis and generalization of the scientific literature have been carried out in order to create the theoretical background of the research of the R&D spillovers and innovation. The qualitative research methods have been employed to investigate relationship between the R&D spillovers and different types of knowledge. The R&D positive effect of spillovers on innovation activity, promotion of cooperation between different agents (individuals, business entities, organizations, and countries), spreadability and access to knowledge on nonprofit basis and enhancement of innovation diffusion have been identified.
{"title":"The R&D Spillovers, Innovation and Knowledge-based Economy","authors":"O. Miroshnychenko","doi":"10.2478/zireb-2020-0025","DOIUrl":"https://doi.org/10.2478/zireb-2020-0025","url":null,"abstract":"Abstract The R&D processes generate knowledge and enhance innovation activity. Knowledge and ideas developed by one agent may spill over to and can be used for economic and acquired by other agents. The results of these processes are known as the R&D spillover effects. Factors, that have influence on innovation diffusion, and determine the place of the R&D spillovers in knowledge-based economy have been investigated in the article. The definition and types of knowledge have been examined. The relationship between the R&D cooperation, different types of knowledge, knowledge spillovers and innovation have been traced. The main objectives of the paper are to consider the concept of the R&D spillovers and connection between different types of knowledge and the R&D spillover effects. Systematic comparative analysis, synthesis and generalization of the scientific literature have been carried out in order to create the theoretical background of the research of the R&D spillovers and innovation. The qualitative research methods have been employed to investigate relationship between the R&D spillovers and different types of knowledge. The R&D positive effect of spillovers on innovation activity, promotion of cooperation between different agents (individuals, business entities, organizations, and countries), spreadability and access to knowledge on nonprofit basis and enhancement of innovation diffusion have been identified.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"91 - 104"},"PeriodicalIF":0.6,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42265464","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Constant current account deficit in Bosnia and Herzegovina results from a large foreign trade imbalance, which in turn is a consequence of uncompetitiveness of the economy in the global market. The current account deficit is mainly financed by foreign remittances, foreign aid, and least of all by foreign investment. Lately, the outflow of the active, working population has been decreasing the labor force (especially the qualified and highly educated employees), as well as the domestic demand, which will exert further pressure on the balance of payments account. On the other hand, monetary policy is operating under the principles of currency board, i.e. applying a firm exchange rate, so the question arises whether and to what extent it is sustainable, under the conditions of a high current account deficit. The purpose of this paper is precisely to examine the relation between the deficit of balance of payments and the sustainability of the currency board arrangement in Bosnia and Herzegovina, under such conditions.
{"title":"Balance of Payments Deficit and Currency Board Arrangement Sustainability in Bosnia and Herzegovina","authors":"Siniša Kurteš, Srđan Amidžić, P. Rajčević","doi":"10.2478/zireb-2020-0022","DOIUrl":"https://doi.org/10.2478/zireb-2020-0022","url":null,"abstract":"Abstract Constant current account deficit in Bosnia and Herzegovina results from a large foreign trade imbalance, which in turn is a consequence of uncompetitiveness of the economy in the global market. The current account deficit is mainly financed by foreign remittances, foreign aid, and least of all by foreign investment. Lately, the outflow of the active, working population has been decreasing the labor force (especially the qualified and highly educated employees), as well as the domestic demand, which will exert further pressure on the balance of payments account. On the other hand, monetary policy is operating under the principles of currency board, i.e. applying a firm exchange rate, so the question arises whether and to what extent it is sustainable, under the conditions of a high current account deficit. The purpose of this paper is precisely to examine the relation between the deficit of balance of payments and the sustainability of the currency board arrangement in Bosnia and Herzegovina, under such conditions.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"43 - 56"},"PeriodicalIF":0.6,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45932787","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract COVID-19 represents not only public health emergency but has become a global economic problem. It has affected all economic sectors threatening global poverty. The important question that arises is what catalyses the spread of the disease? In this paper the relationship between population density and spread of COVID-19 is observed which is goal of the paper. For the purpose of the analysis the correlation between the population variables and COVID-19 variables on a global country level (209 countries) and regional level of individual countries with the most cases of infection is observed. The results have shown that on a country level variable population is statistically significant in all regression models for total cases, deaths and total tests variables whereas variable population density was not. The research results from this paper can be important and relevant for economic and health policy makers to guide COVID-19 surveillance and public health decision-making.
{"title":"Does High Population Density Catalyze the Spread of COVID-19?","authors":"Berislav Žmuk, Hrvoje Jošić","doi":"10.2478/zireb-2020-0020","DOIUrl":"https://doi.org/10.2478/zireb-2020-0020","url":null,"abstract":"Abstract COVID-19 represents not only public health emergency but has become a global economic problem. It has affected all economic sectors threatening global poverty. The important question that arises is what catalyses the spread of the disease? In this paper the relationship between population density and spread of COVID-19 is observed which is goal of the paper. For the purpose of the analysis the correlation between the population variables and COVID-19 variables on a global country level (209 countries) and regional level of individual countries with the most cases of infection is observed. The results have shown that on a country level variable population is statistically significant in all regression models for total cases, deaths and total tests variables whereas variable population density was not. The research results from this paper can be important and relevant for economic and health policy makers to guide COVID-19 surveillance and public health decision-making.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"13 - 27"},"PeriodicalIF":0.6,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46871518","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Danijela Ferjanić Hodak, Goran Belošević, A. Vlahov
Abstract Electronic music festivals became one of the most successful forms of tourism for young adults. In the paper, authors aimed to explored the motivation and the perception of the potential visitors of electronic music festivals in Croatia and to identify the key dimensions of electronic music festivals. Instrument used for the primary research was a structured on-line questionnaire distributed among students of the University of Zagreb. In total, 350 questionnaires were collected and analyzed. Factor analyses resulted with three factors concerning motivation (music and fun, travel, socialization). Motives with the highest mean value are closely related with the core of electronic music festival offer, but other motives should not be neglected. Paper provides several recommendations for the improvement of electronic music festival offer and suggest the direction and possibilities for the future research.
{"title":"Towards better understanding electronic music festivals motivation","authors":"Danijela Ferjanić Hodak, Goran Belošević, A. Vlahov","doi":"10.2478/zireb-2020-0018","DOIUrl":"https://doi.org/10.2478/zireb-2020-0018","url":null,"abstract":"Abstract Electronic music festivals became one of the most successful forms of tourism for young adults. In the paper, authors aimed to explored the motivation and the perception of the potential visitors of electronic music festivals in Croatia and to identify the key dimensions of electronic music festivals. Instrument used for the primary research was a structured on-line questionnaire distributed among students of the University of Zagreb. In total, 350 questionnaires were collected and analyzed. Factor analyses resulted with three factors concerning motivation (music and fun, travel, socialization). Motives with the highest mean value are closely related with the core of electronic music festival offer, but other motives should not be neglected. Paper provides several recommendations for the improvement of electronic music festival offer and suggest the direction and possibilities for the future research.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"141 - 154"},"PeriodicalIF":0.6,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47465836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This study focuses on: (1) finding the causes of inflation which follows the inflation theories such as Demand-Pull, Cost-Push and Structural inflation.(2) measuring the degree of inflation persistence in order to evaluate the ability of monetary policies to control inflation. Engle- Granger test and the Autoregressive Distributed Lag are applied to analyze the response of inflation to its determinants. The Grid bootstrap Method and Impulse Response Functions measure the inflation persistence. The results suggest that controlling the money supply is a key factor in controlling inflation. The appreciation of Rial exchange rate is an important factor of low inflation. It is increased as a result of Budget deficit while decreased due to oil price and real GDP. Inflation persistence follows the structural changes and finally permanent shocks die out after some horizons. Therefore, monetary authorities control inflation but their policies are yet far from optimal level.
{"title":"Inflation Theories and Inflation Persistence in Iran","authors":"Hamidreza Ghorbani Dastgerdi","doi":"10.2478/zireb-2020-0011","DOIUrl":"https://doi.org/10.2478/zireb-2020-0011","url":null,"abstract":"Abstract This study focuses on: (1) finding the causes of inflation which follows the inflation theories such as Demand-Pull, Cost-Push and Structural inflation.(2) measuring the degree of inflation persistence in order to evaluate the ability of monetary policies to control inflation. Engle- Granger test and the Autoregressive Distributed Lag are applied to analyze the response of inflation to its determinants. The Grid bootstrap Method and Impulse Response Functions measure the inflation persistence. The results suggest that controlling the money supply is a key factor in controlling inflation. The appreciation of Rial exchange rate is an important factor of low inflation. It is increased as a result of Budget deficit while decreased due to oil price and real GDP. Inflation persistence follows the structural changes and finally permanent shocks die out after some horizons. Therefore, monetary authorities control inflation but their policies are yet far from optimal level.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"1 - 20"},"PeriodicalIF":0.6,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"69135062","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Unlike the old member states that compensate the negative net birth rate with immigration, the new EU member states face both migrational and natural demographic decline. In the last decade, poor level of economic development as well as the accession to the EU encouraged net emigration from the new member states. Panel data for the 12 new member states for the 2007 - 2016 period were used to determine how the length of membership and GDP per capita trailing behind the EU average affect the proportion of the net emigration. It has been shown that on average a country has to reach at least 85 percent of the average EU GDP p.c. (measured in PPS) to prevent emigration, but this level increases with each year of membership by 1.37 percentage points.
{"title":"New EU member states’ emigration: Projections for future and lessons for the new EU candidates","authors":"I. Herceg, T. Herceg, L. Škuflić","doi":"10.2478/zireb-2020-0017","DOIUrl":"https://doi.org/10.2478/zireb-2020-0017","url":null,"abstract":"Abstract Unlike the old member states that compensate the negative net birth rate with immigration, the new EU member states face both migrational and natural demographic decline. In the last decade, poor level of economic development as well as the accession to the EU encouraged net emigration from the new member states. Panel data for the 12 new member states for the 2007 - 2016 period were used to determine how the length of membership and GDP per capita trailing behind the EU average affect the proportion of the net emigration. It has been shown that on average a country has to reach at least 85 percent of the average EU GDP p.c. (measured in PPS) to prevent emigration, but this level increases with each year of membership by 1.37 percentage points.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"129 - 140"},"PeriodicalIF":0.6,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47768623","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The elaborate proposes a compact alternative methodology to the classical stocks portfolio optimization based on the normal distribution of the returns of the assets named Adaptable - Kurtosis Asymmetry model (A-KA). In the financial theory is well-known that odd-order moments of a distribution describe a particular performance characteristic; on the contrary, the even-order moments tell a precise sense of risk of a distribution of returns. If it is true that, in general terms, minimizing the variance also minimizes the volatility of portfolio return is also true that we should minimize the kurtosis to get away from unpleasant situations in case “Extreme” events occur, especially if negative. The idea behind this paper is to exploit the four moments of return’s distributions, optimizing an alternative risk indicator to variance, such as the kurtosis of the final distribution of the portfolio, making constraints on distributive asymmetry, in a dynamic underlying logic.
{"title":"A-KA Model: an Optimization of the Stock’s Portofolio","authors":"Filippo Regina, M. Bisceglia","doi":"10.2478/zireb-2020-0012","DOIUrl":"https://doi.org/10.2478/zireb-2020-0012","url":null,"abstract":"Abstract The elaborate proposes a compact alternative methodology to the classical stocks portfolio optimization based on the normal distribution of the returns of the assets named Adaptable - Kurtosis Asymmetry model (A-KA). In the financial theory is well-known that odd-order moments of a distribution describe a particular performance characteristic; on the contrary, the even-order moments tell a precise sense of risk of a distribution of returns. If it is true that, in general terms, minimizing the variance also minimizes the volatility of portfolio return is also true that we should minimize the kurtosis to get away from unpleasant situations in case “Extreme” events occur, especially if negative. The idea behind this paper is to exploit the four moments of return’s distributions, optimizing an alternative risk indicator to variance, such as the kurtosis of the final distribution of the portfolio, making constraints on distributive asymmetry, in a dynamic underlying logic.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"21 - 40"},"PeriodicalIF":0.6,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43266393","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We determine the nexus between imports and economic growth for a sample of 26 African countries for the period 1990-2015 within the neoclassical production function framework. We mainly contribute to literature by overcoming the weak theoretical modelling framework and possible model specification bias in most extant studies. Using the Toda-Yamamoto Granger non-causality test, the empirical results indicate that there is absence of causality between imports and economic growth in more than half of the countries in the sample, thus suggesting that neutrality hypothesis is predominant among the countries. We provide ample evidence that causality is absent from imports to economic growth. However, our results should be treated with caution because the absence of causality from imports to economic growth should not imply that imports do not play a role in the growth process of an economy.
{"title":"Import-economic growth nexus in selected African countries: An application of the Toda-Yamamoto Granger non-causality test","authors":"O. Aluko, Adefemi A. Obalade","doi":"10.2478/zireb-2020-0016","DOIUrl":"https://doi.org/10.2478/zireb-2020-0016","url":null,"abstract":"Abstract We determine the nexus between imports and economic growth for a sample of 26 African countries for the period 1990-2015 within the neoclassical production function framework. We mainly contribute to literature by overcoming the weak theoretical modelling framework and possible model specification bias in most extant studies. Using the Toda-Yamamoto Granger non-causality test, the empirical results indicate that there is absence of causality between imports and economic growth in more than half of the countries in the sample, thus suggesting that neutrality hypothesis is predominant among the countries. We provide ample evidence that causality is absent from imports to economic growth. However, our results should be treated with caution because the absence of causality from imports to economic growth should not imply that imports do not play a role in the growth process of an economy.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"117 - 128"},"PeriodicalIF":0.6,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45160498","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Many countries implement plans and programs whose purpose is low-income class protection and increase the purchasing power in order to eradicate poverty. The most common plan is the subsidies payment for consumption of deficits. Governments provide inexpensive goods and services and help to make price stability for necessities by applying policy in consumption sector. This research studies consumption expenditure shares in rural and urban households according to the importance of this issue and accordingly expenditure shares are rated and it is the basis of targeting subsidy policy. This article by use the MICROFIT program (ARDL method, 42 observations used for estimation from 1977 to 2019), tries to survey the short and long-term relationship, the dynamic relationship of short-term trend toward long-term equilibrium, diagnostic and structural break tests for the variables and the household costs function. According to the results of statistic tests, the model presented the best possible status of classic hypotheses and statistics and therefore confirm the relationship and co-integration between the variable of cost function and finally, structural stability is accepted. By comparing the urban household costs, according to the results we can say that the food is ranked among the goods with low rank, therefore, targeting the subsidies is less important than the rest of the cost. Also, the cost share of clothing goods is totally high for households and in urban households’ expenditures, the cost share of these goods is higher than the rest, so these costs play an important role in targeting the subsidies and should be taken into consideration. By comparing the rural household costs, we can say, the contribution of educational, cultural and recreational services costs for rural households is high and thus the share of the allocated expenditures for such goods is higher than the rest. Therefore, these costs play an important role in targeting the subsidies and should be taken into consideration. Finally, targeting subsidy helps government to arrange subsidy rate of different goods correctly. and give the most to low income classes to boost social welfare. Result show that targeting subsidy in rural and urban is different because of different expenditures share in household budget, and the same economics policy for these two household types is not correct.
{"title":"An Investigation on the Share of Rural and Urban Households’ Expenditure as A Basis to Determine Economic Policies for Iran","authors":"H. Izadi","doi":"10.2478/zireb-2020-0013","DOIUrl":"https://doi.org/10.2478/zireb-2020-0013","url":null,"abstract":"Abstract Many countries implement plans and programs whose purpose is low-income class protection and increase the purchasing power in order to eradicate poverty. The most common plan is the subsidies payment for consumption of deficits. Governments provide inexpensive goods and services and help to make price stability for necessities by applying policy in consumption sector. This research studies consumption expenditure shares in rural and urban households according to the importance of this issue and accordingly expenditure shares are rated and it is the basis of targeting subsidy policy. This article by use the MICROFIT program (ARDL method, 42 observations used for estimation from 1977 to 2019), tries to survey the short and long-term relationship, the dynamic relationship of short-term trend toward long-term equilibrium, diagnostic and structural break tests for the variables and the household costs function. According to the results of statistic tests, the model presented the best possible status of classic hypotheses and statistics and therefore confirm the relationship and co-integration between the variable of cost function and finally, structural stability is accepted. By comparing the urban household costs, according to the results we can say that the food is ranked among the goods with low rank, therefore, targeting the subsidies is less important than the rest of the cost. Also, the cost share of clothing goods is totally high for households and in urban households’ expenditures, the cost share of these goods is higher than the rest, so these costs play an important role in targeting the subsidies and should be taken into consideration. By comparing the rural household costs, we can say, the contribution of educational, cultural and recreational services costs for rural households is high and thus the share of the allocated expenditures for such goods is higher than the rest. Therefore, these costs play an important role in targeting the subsidies and should be taken into consideration. Finally, targeting subsidy helps government to arrange subsidy rate of different goods correctly. and give the most to low income classes to boost social welfare. Result show that targeting subsidy in rural and urban is different because of different expenditures share in household budget, and the same economics policy for these two household types is not correct.","PeriodicalId":42298,"journal":{"name":"Zagreb International Review of Economics & Business","volume":"23 1","pages":"41 - 53"},"PeriodicalIF":0.6,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48402263","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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