Who should take care of local economic development in Croatia? This question seems trivial;
however, there are still some open questions. According to current legislation, local economic
development is an administrative task of the 21 counties, the current units of regional selfgovernment.
On the other hand, the cities and municipalities as units of local self-government
regularly get involved in economic development activities, though this is not directly defined
in the legislation. There is a contradiction concerning development capacity of cities and
counties. Cities attract population and economic activity and are usually stronger than
counties in terms of financial and human resources that are necessary for economic
development activities.
This research questions if the existing administrative-territorial setup and functions of
counties in Croatia correspond to the needs of economic growth and development on local
level. It is also intended to get some insights from concepts that derive from trade theory,
location theory and economic geography. Governance relations between bigger cities and
counties in fostering local economic development in Croatia will be examined. For this
purpose, local and regional data will be analyzed and through the discussion on existing
governance structures, qualitative insights on the appropriateness of the current situation will
be presented. The main goal of this research paper is to find quantitative and qualitative
justification for an appropriate governance structure for fostering local economic
development in Croatia.