The Fiscal Consequences of Emigration: Evidence from Croatia

Abstract This article examines how the large shock in emigration following Croatia’s accession to the European Union affected local public finances. To do so, a difference in differences research design has been used on a balanced panel dataset of municipality level observations over a ten-year period. The areas that experienced the largest emigration in the post 2014 period saw a large negative decrease in total tax revenue over the subsequent years, mainly driven by income tax revenue decrease. The results of this research warn that large emigration flows can lead to a cycle of economic degeneration as local areas lose fiscal revenue to spend on local services, in turn making them less likely to attract citizens.