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The labor market performance in Croatia failed to keep pace with the moderately good overall macroeconomic development in the past few years. Youth, the less well-educated, and women face more difficulties in getting a job with a decent salary. A large part of the difference in regional labor market performance is associated with the difference in the human capital endowment. With a stagnant total employment rate, the large disparities in employment and earnings across individual groups and regions have become one of the concerns for the long-term sustainable development of the economy. Using Labor Force Survey (LFS) data from 2002-04, this paper studies the labor market performance in Croatia at the national and regional levels. The results show that both one's individual characteristics (including age, education and gender) and where he or she works plays a role in his or her employment and earnings. Regional differences in employment and earnings are reduced to a large extent when accounting for differences in individual characteristics. The simulations shed light on the effectiveness of the nationwide education policy and regional specific labor market policy, and suggest that improving human capital endowment and adjusting labor market structure are both important to rebalance regional development and enhance total welfare.

Age Groups --- Earning --- Employment Rate --- Employment Service --- Finance and Financial Sector Development --- Financial Literacy --- Human Capital --- Job --- Labor --- Labor Force --- Labor Force Participation --- Labor Market --- Labor Market Development --- Labor Market Performance --- Labor Market Policy --- Labor Markets --- Labor Organization --- Labor Policies --- Long-Term Unemployment --- Social Protections and Labor --- Total Employment --- Unemployed --- Unemployed Population --- Unemployment Benefits --- Unemployment Rate

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This paper studies the trends and cycles of informal employment. It first presents a theoretical model where the size of informal employment is determined by the relative costs and benefits of informality and the distribution of workers' skills. In the long run, informal employment varies with the trends in these variables, and in the short run it reacts to accommodate transient shocks and to close the gap that separates it from its trend level. The paper then uses an error-correction framework to examine empirically informality's long- and short-run relationships. For this purpose, it uses country-level data at annual frequency for a sample of industrial and developing countries, with the share of self-employment in the labor force as the proxy for informal employment. The paper finds that, in the long run, informality is larger in countries that have lower GDP per capita and impose more costs to formal firms in the form of more rigid business regulations, less valuable police and judicial services, and weaker monitoring of informality. In the short run, informal employment is found to be counter-cyclical for the majority of countries, with the degree of counter-cyclicality being lower in countries with larger informal employment and better police and judicial services. Moreover, informal employment follows a stable, trend-reverting process. These results are robust to changes in the sample and to the influence of outliers, even when only developing countries are considered in the analysis.

Active Labor --- Business Cycle --- Economic Theory and Research --- Exogenous Variable --- Informal Economies --- Informal Economy --- Informal Employment --- Informal Labor Markets --- Informal Sector --- Labor --- Labor Force --- Labor Markets --- Labor Organization --- Labor Policies --- Macroeconomics and Economic Growth --- Minimum Wage --- Previous Section --- Productivity Differential --- Productivity Level --- Public Services --- Small Manufacturing --- Social Protections and Labor --- Total Employment --- Worker --- Workers