The Analysis of Net Position Development and the Comparison with GDP Development for Selected Countries of European Union

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1 The Analyss of Net Poston Development and the Comparson wth GDP Development for Selected Countres of European Unon JAROSLAV KOVÁRNÍK Faculty of Informatcs and Management, Department of Economcs Unversty of Hradec Králové Roktanského 6, , Hradec Králové CZECH REPUBLIC Abstract: The topc of European Unon budget s very mportant for each member state, especally nowadays because of recessve economcal crss and ongong crss of euro zone. Czech Republc has been a member state of EU snce 004 and also has been n a poston of net recpent for a whole perod. Ths means, that the amounts provded for European budget by the Czech Republc are less than the amounts receved from European budget. However, the creaton of EU budget s qute complcated. The revenues of EU budget are Total natonal contrbutons, Tradtonal own resources, and Other revenues. The expendture of European Unon budget n the Fnancal Framework are provded nto sx areas Sustanable growth, Preservaton and management of natural resources, Ctzenshp, freedom, securty, and justce, The EU as a global partner, Admnstraton and Compensaton. In the prevous Fnancal Framework were expendture provded nto eght areas Agrculture, Structural actons, Internal polces, External actons, Admnstraton, Reserves, Pre-accesson ad and Compensaton. The dfferent structure of EU expendture for each fnancal framework complcates the separate analyss of revenues and expendture n the vew of each member states, therefore t s possble to analyse and compare only total values of expendture and revenues, wth only short-term analyss of concrete expendture areas wthn each framework. It s of course possble to analyse net poston of each state as well. However, n ths analyss s better to compare not only total amount of net poston, but also net poston per capta ths recalculaton helps to compare the stuaton of each member state much better than comparson of total amounts. Ths artcle analyse not only development of net poston for selected countres of EU, but also compare the net poston development wth the GDP development. The level of GDP should be one of the most mportant ndcators for calculaton of contrbutons for each member state, but because of many exceptons and very complcated mechansm ts nfluence could be low. Ths artcle used statstcal methods for comparson of net poston development and GDP development for selected EU countres. Key Words: budget Czech Republc European Unon expendture net poston revenues. 1 Introductons Ths artcle deals wth the ssues of European Unon budget, wth analyss of ts revenues and expendture, wth analyss of net poston development, and wth comparson of ths development wth GDP development for selected EU countres. The structure of expendtures has been changed durng past several years. Ths change s related to a new am of European Unon for Fnancal Framework Ths am s to create n European Unon knowledge and nnovaton based economy and become a Manuscrpt receved Aprl 15, 01. J. Kovárník s wth the Department of Economcs, Faculty of Informatcs and Management, Unversty of Hradec Králové, Roktanského 6, Hradec Králové, Czech Republc (e-mal: jaroslav.kovarnk@uhk.cz). compettor to the leadng economes, most of all Unted States of Amerca. Therefore n these days there s a sgnfcant ncrease n the expendtures for structural and regonal polcy, whle there s a relatve decrease n the expendtures for agrcultural polcy. Czech Republc, whch has been member of European Unon snce 004, s a net recpent for a whole perod. Ths means, that the amounts provded for European budget by the Czech Republc are less than the amounts receved from European budget. These amounts, provded nto Czech natonal budget from European budget, could be sgnfcant and mportant for the development of Czech Republc, as well as for the other net recpents. Ths analyss s one of the ams of ths artcle. ISBN:

2 The Sze of the Net Poston As mentoned above, there are countres n the European Unon, whch are n the poston of net contrbutor, and the other countres, whch are n the poston of net recpent. Net contrbutors are provdng more amounts nto the common European budget than they receve back. The stuaton of net recpents s completely reversed; ther contrbutons nto the common European budget are less than the amounts receved from ths budget. [5] The bggest net contrbutors, recalculated per capta, are Netherlands, Sweden, Denmark, Germany, etc. All of net contrbutors, except Cyprus, could be consdered as developed countres. The bggest net recpents, recalculated per capta, are Luxembourg, Estona, Lthuana, Greek, Latva, Hungary etc. Except Luxemborough, all of net recpents could be consdered as developng countres. The shares of net poston per capta on GDP per capta for net recpents for the perod are n the followng Table No. 1. TABLE 1 THE SHARE OF NET POSITION ON GDP (%) Year Belgum Greek Span Luxembourg Portugal Czech Republc Estona Lthuna Latva Hungary Malta Poland Slovena Slovaka Bulgara Romana In the Table No. 1 t s possble to analyze, that the share of net poston on GDP s qute sgnfcant for some countres; specfcally n the year 010 there was share over 4 % n Latva and Estona, over 3 % n Lthuana and Luxembourg, and over % n Hungary, Bulgara and Poland. Therefore t could be assumed, that the development of net poston per capta has an nfluence on the development of GDP per capta for some net recpents. The verfcaton of ths hypothess s one of the ams of ths artcle. Only three countres have been chosen for the analyss n ths artcle, specfcally Czech Republc and two countres wth the hghest share of net poston on GDP, whch means Latva and Estona. 3 The Characterstcs of Analyzed Countres The bref characterstc of three analyzed coutres follows. All of them became members of EU n 004. Czech Republc s the largest of them wth the number of nhabtants over 10 mllons people, Latva has over mllns nhabtants, and Estona only a lttle bt over 1 mllon nhabtants. Czech Republc les n the Central Europe and the captal s Prague, Latva and Estona are both so called Baltc countres and ther captals are Rga and Talln. Selected demographc and economc data of these countres for the perod are n the followng Table No., Table No. 3, Table No. 4, and Table No. 5 (GDP s n Euro per capta, Expendtures of EU budget, Revenues of EU budget and Net postons n mllons of Euro). TABLE Indcator CZE Populaton CZE GDP CZE Expendtures 100,3 99,1 54,4 CZE Revenues CZE Net Poston 100,3 99,1 54,4 LVA Populaton LVA GDP LVA Expendtures 50,9 56,6 54,0 LVA Revenues LVA Net Poston 50,9 56,6 54,0 EST Populaton EST GDP EST Expendtures 44,6 33, 43, EST Revenues EST Net Poston 44,6 33, 43, TABLE 3 Indcator CZE Populaton CZE GDP CZE Expendtures 8,1 815,7 1074,9 CZE Revenues - 565, 990, CZE Net Poston 8,1 50,5 84,7 LVA Populaton LVA GDP LVA Expendtures 79,3 67,0 385,0 LVA Revenues - 67,5 19,8 LVA Net Poston 79,3 199,5 55, EST Populaton EST GDP EST Expendtures 75, 0,0 48,7 EST Revenues - 55,4 99,7 EST Net Poston 75, 146,6 149,0 TABLE 4 Indcator CZE Populaton CZE GDP CZE Expendtures 1330,0 171,0 441,1 ISBN:

3 CZE Revenues 1035,3 1167,0 1396,0 CZE Net Poston 94,7 554,0 1045,1 LVA Populaton LVA GDP LVA Expendtures 40,6 675,0 610,4 LVA Revenues 155,1 199,0 15,6 LVA Net Poston 47,5 476,0 394,8 EST Populaton EST GDP EST Expendtures 300,0 376,9 368,3 EST Revenues 130,3 176,7 161, EST Net Poston 169,7 00, 07,1 TABLE 5 Indcator CZE Populaton CZE GDP CZE Expendtures 948,6 3415,6 CZE Revenues 1374,1 1497,7 CZE Net Poston 1574,5 1917,9 LVA Populaton LVA GDP LVA Expendtures 710,3 843,6 LVA Revenues 15,6 175,0 LVA Net Poston 494,7 668,6 EST Populaton EST GDP EST Expendtures 716,4 807,9 EST Revenues 158,5 14,4 EST Net Poston 557,9 665,5 It s possble to analyze from above mentoned tables, that the only state wth ncreasng number of nhabtants s Czech Republc; populaton n the other two countres has been decreasng n the analyzed perod. Instead of the dfferent development n the populaton, the development n GDP per capta s almost the same n these countres. The level of GDP per capta was nreasng n the perod , but n the next year there was a sgnfcant decrease because of economc crss. In the year 010, the levels of GDP n Czech Republc and Estona were growng agan, but n both countres was ths level lower than n the year 008, that means before the crss. In Latva contnued the decrease of GDP per capta n 010. The development of net poston s rather ramblng n the analyzed perod n all analyzed countres. In Czech Republc, ths ndcator has been growng snce 005, regardless on economc crss. The ncreases have been seen not only n net poston, but also both n reveneues and expendtures n Czech Republc. In Latva, net poston s decreasng every few years (specfcally n 00, 006, and 008). Nevertheless, the expendtures decrease only n 00 and 008, whle the revenues were ncreasng snce 004 untll 008, n 009 were the revenues at the same level as n 008, and n 010 there was decrease of ths ndcator n Latva. The net poston n Estona has been ncreasng snce 001. The expendtures for ths country were decreasng only n 001 and 008, whle the revenues were ncreasng snce 004 untll 007, and decreasng snce 007 untll The Comparson of Net Poston and GDP Development It s possble to make a partal concluson based on the data from above mentoned Tables. It s obvous, that the GDP development was affected by economc crss n alle three analyzed countres, whle the net poston development was not affected by ths factor. For better analyss, t s necessary to recalculate the net poston also per capta lke GDP. Due to ths recalculaton t s possble to compare the value of GDP and net poston n analyzed countres rerardless of the number of nhabtants. The comparson of development of GDP per capta and net poston per capta for Czech Republc, Latva and Estona s descrbed on followng Fg. No. 1, Fg. No., and Fg. No. 3. For a better comparson, there s GDP per capta n hundreds of Euro and net poston n Euro n these fgures. ISBN:

4 FIG. 1 THE DEVELOPMENT OF GDP AND NET POSITION IN CZECH REPUBLIC Czech Republc 00,0 150,0 100,0 50,0 Net Poston GDP 0, FIG. THE DEVELOPMENT OF GDP AND NET POSITION IN LATVIA Latva 350,0 300,0 50,0 00,0 150,0 Net Poston GDP 100,0 50,0 0, ISBN:

5 FIG. 3 THE DEVELOPMENT OF GDP AND NET POSITION IN ESTONIA Estona 600,0 500,0 400,0 300,0 00,0 Net Poston GDP 100,0 0, The Statstcal Background Based on above mentoned Fgures t s possble to make another partal concluson, that despte the recalculaton per capta, the development of net poston and GDP s dfferent n analyzed countres. The queston to solve s, whether the dfferences n the developments are sgnfcant or not. As a statstcal tool for ths analyss was chosen a selectve correlaton coeffcent, whch can analyze the sze of nteracton between GDP per capta and net poston per capta. r X, Y = n = 1 X n = 1 nx X Y nxy * n = 1 Y ny By usng of ths coeffcent t s possble to verfy the null hypothess that there s no correlaton relatonshp, aganst the alternatve hypothess that there s correlaton relatonshp n the GDP and net poston development. For the testng of ths null hypothess there wll be used the followng test crteron. r T = * n 1 r Assumng valdty of null hypothess, the test crteron wll have the Student probablty dstrbuton wth n degrees of freedom. The crtcal value of ths dstrbuton on the level of sgnfcance α = 0.05 wth 9 degrees of freedom (analyzed data snce 000 untll 010) s.6. The null hypothess about no correlaton relatonshp wll be vald, when the value of test crteron falls nto the acceptable value area, n ths case value lower than above mentoned.6. [3, 4] The results of selectve correlaton coeffcent are n the followng Table No. 6. TABLE 6 THE RESULTS OF SELECTIVE CORRELATION COEFFICIENT State Result Acceptance Czech Republc Latva Estona Source: own calculatons Accordng to these results, the null hypothess about no exstence of correlaton between the GDP per capta and net poston per capta development wll be dened and vald s the alternatve hypothess that there s some correlaton relatonshp between GDP per capta and net poston per capta n analyzed countres. Ths analyss s of course not the perfect one. There are some ponts, whch could be crtczed. Frst of all, all of analyzed countres have been payng contrbutons nto the common EU budget snce 004, when all of them became members of EU. Therefore the net poston as a dfference between expendtures and revenues could be calculated snce 004. On the other hand, all of these countres used some knd of ad from European sources before the entrance nto EU, therefore there were some postve net postons n the perod , but t was not the ISBN:

6 dfference between the expendture and revenues. However, t s possble to use the data from the perod for ths analyss. The length of analyzed perod could be another crtczed pont, but there was almost no ad from EU budget before the year 000. The other possble crtczed pont could be the selecton of selectve correlaton coeffcent. The reason for applcaton of ths coeffcent was ts smplcty. There could be of course chosen other statstcal tool, but ths one s qute smple and t could verfy the hypothess about exstence of correlaton due to smple calculaton. 6 Concluson Ths artcle deals wth the ssue of European Unon budget. Ths problematc s very mportant for Czech Republc, because Czech Republc s a member state snce 004 and s a net recpent for a whole perod. It s obvous, that membershp n European Unon s usefull for Czech Republc as t receves more resources from European Unon than t provdes nto European Unon, as well as Latva and Estona. The above mentoned results are showng that there s a correlaton relatonshp between the development of GDP per capta and the development of net poston per capta. Ths concluson only supports the mportance of EU budget for analyzed countres. The ssue of European Unon budget s very actually n ths tme. The acceptance of Lsboa Strategy n December 009 changed not only the structure of European Unon expendture, but t also changed the process of European Unon budget adopton. The European Parlament has mportant role n ths process n ths tme. In the vew of lngerng economc crss, problems of euro n Greece and Ireland, changes because of Lsboa Strategy acceptance, and because of ongong dscussons about Fscal Pact, t should be good dea to pay attenton on European Unon budget. These resources from European Unon could be used n Czech Republc, Latva and Estona for restartng of economc growth, as well as n other member states, whch are net recpents. References [1] European Commsson. EU Budget 006 Fnancal Report. Luxemburg: Offce for Offcal Publcatons of the European Communtes, 007. ISBN [] European Commsson. EU Budget 009 Fnancal Report. Luxemburg: Publcatons Offce of the European Unon, 010. ISBN [3] J. Křupka, R. Provazníková, J. Švejcar. Multple Crtera Decson Analyss of EU Project Implementaton Benefts for the Impacted Mcro-regon. In Internatonal Journal of Mathematcal Models and Methods n Appled Scences, 011. Vol. 5 (8), pp ISSN [4] P. Petr, J. Křupka, R. Provazníková. Statstcal Approach to Analyss of the Regons. In 10 th WSEAS Internatonal Conference Selected Topcs n Appled Computer Scence 010. Athens: WSEAS Press, 010. ISBN ISSN [5] J. Stejskal, J. Kovárník. Regonal Polcy and ts Instruments. Prague: Portál, 009. ISBN Jaroslav Kovárník was born n Pardubce, Czech Republc, on 4 th December He became hs Engneer degree n the feld of Economc polcy and admnstraton at Unversty of Pardubce, Czech Republc, n the year 004. He became hs Ph.D. degree n the feld of Regonal and publc economy at Unversty of Pardubce, Czech Republc, n the year 007. Hs major feld of study s regonal polcy and regonal development. J. Kovárník s now workng at Unversty of Hradec Králové, Czech Republc, Faculty of Informatcs and Management, Department of Economcs. ISBN: