Central and local state budget is usually perceived as a gender - neutral instrument of fiscal policy because it numerically shows total public revenues and expenditures that result in budget surplus or deficit. However, the budget has a very different impact on female and male population, which stems from their different socially shaped gender roles. Therefore, in the budgeting process, the government should recognise and take into account different roles and responsibilities of men and women in their society and on the basis of these findings allocate public money and implement policies and programmes that contribute to greater gender equality. The basic aim of this dissertation is to address the issue of the current problem of gender inequality, its causes and effects, and using scientific evidence raise awareness of the need for implementing gender - sensitive budgeting that does not only have a different impact on women and men, but also promotes gender equality as one of the important economic, political and social objectives. By integrating social and economic development, a gender - sensitive budget promotes the complementarity of economic growth and social equity, strengthens the public governance and contributes to the efficiency of economic policies without a negative impact on gender equality. The theoretical part of the dissertation presents key benefits, participants, requirements, and phases of the gender budgeting process. Considering that higher participation of women in the labour market is the main prerequisite of greater gender equality, in order to decrease gender inequality, it is necessary to finance certain public functions that help women reconcile their professional and family life, and thus enable more equal position of women in the labour market. Due to the decentralisation of certain public functions, empirical research is mainly focused on the level of gender awareness of local policies and the structure of public spending in the Croatian cities. The level of satisfaction of needs and absolute and relative levels of public spending on childcare are considered in this process, because childcare, as a measure that “liberates” parents from all - day care of children, allows the participation of both parents in the labour market. At the same time, to make a comparison of gender sensitivity of Croatian local economic policy in an international context, this phenomenon was tested using panel data analysis at the EU level. Panel data analysis on a sample of 28 EU member states demonstrated that availability of full - day childcare contributes to greater employment of women with children under the age of six, i. e. decreases the difference in employment rates of women without children and women with children under the age of six. Empirical research on the national level using regression analysis on the sample of all 126 cities and the City of Zagreb demonstrated the positive impact of availability and public spending on childcare on employment of women. These results confirm that, by financing public functions that make it easier for women to combine family and professional life, the purpose of gender budgeting exceeds gender equality as a fundamental objective and becomes a driving force of modernisation of the public sector, increases employment, productivity and growth of overall economy by intensifying the involvement of women in the labour market and by taking advantage of their skills and intellectual capital which directly contribute to the economic efficiency of the public sector. This also proves the main hypothesis of the dissertation. These conclusions are the basis for further research and initiatives towards the implementation of gender budgeting in the Republic of Croatia.