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Regional development under socialism: evidence from Yugoslavia

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  • Kukić, Leonard

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

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  • Kukić, Leonard, 2017. "Regional development under socialism: evidence from Yugoslavia," Economic History Working Papers 85078, London School of Economics and Political Science, Department of Economic History.
    • Handle: RePEc:ehl:wpaper:85078
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    Cited by:

    1. Leonard Kukić, 2021. "The Nature Of Technological Failure: Patterns Of Biased Technical Change In Socialist Europe," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 895-925, July.

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    More about this item

    Keywords

    economic growth; regional development; economic history: Yugoslavia; socialism;
    All these keywords.

    JEL classification:

    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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