Regional development under socialism: evidence from Yugoslavia

Leonard Kukić

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper analyses the patterns of regional growth and development in Yugoslavia, under the most decentralised socialist system that ever existed. My analysis reveals that despite government efforts to the contrary, socialist economic development in Yugoslavia resulted in divergence rather than in convergence between the constituent regions. I find that regional income divergence was caused by the failure of the less developed regions to converge towards the employment rates and total factor productivities of the more developed regions. I interpret these failures as symptoms of a single underlying problem: a capital intensity bias inherent to the governing objective of labour-managed firms. Socialist Yugoslavia moved from having one central plan, to having many mutually competitive plans. While on aggregate this may have created a net positive productivity outcome compared to other socialist economies, it created unique distortions. The decentralisation policies were implemented with the aim of enhancing regional cohesion and social stability. They led, however, to exactly opposite outcomes

Keywords: economic growth; regional development; economic history: Yugoslavia; socialism (search for similar items in EconPapers)
JEL-codes: N14 O47 P27 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2017-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:85078

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