Similarly, results of the shift-share analysis of labour
productivity and the output-capital ratio show that: (a) there is a
strong connection between a region's level of development and its
success (measured by the difference between the regional and the
average efficiency), here in terms of a positive correlation between
the two; (b) the differential shift has a decisive effect on the
success of regions, and its effect is positive with developed regions
and negative with the underdeveloped ones; and (c) differences in the
sectoral structure of regions have no significant influence on the
differences in their success.
The developed regions fell into the most successful or
predominantly successful regions, while the underdeveloped regions fell
into the predominantly unsuccessful category. The differences between
the most successful and the least successful regions are wide: in no
year was the efficiency of successful regions below the Yugoslav
average, while the efficiency of the least successful regions in no
year exceeded the Yugoslav average.
In terms of labour productivity regions are grouped as follows:
successful regions (Croatia and Slovenia), occasionally (un)successful
(Vojvodina, central Serbia and Montenegro), and unsuccessful ones
(Macedonia, Kosovo-Metohia and Bosnia-Herzegovina). In terms of fixed
assets efficiency regions are grouped into successful ones (Slovenia,
central Serbia and Vojvodina), occasionally (un)successful (Croatia and
Macedonia), and unsuccessful ones (Bosnia-Herzegovina, Kosovo-Metohia
and Montenegro).
Relatively minor differences in the sectoral structure of regional
economies, i.e. the small influence of these structural differences on
the differences in regional efficiency can be explained by an ambition
of macroeconomic decision-makers of almost all regions to obtain, if at
all possible, everything that Yugoslavia already possessed so that "one
day"regions could function as sovereign independent states. Moreover,
the completion of regional economic structures was carried out
according to the overall Yugoslav model of socialist industrialization.
The desire to achieve self-sufficiency, in the absence of either strong
economic incentives or coercion which could induce radical structural
changes, led, among other things, to the self-reproduction of the
"original"economic structure of regions ("a little bit more of the
same"). According to the law of inertia, in an environment dominated by
seminatural, technological and "agreement-based"(arbitrary) investment
criteria, with a lack of innovation and a strong aversion to risk,
necessary structural adjustments fail to occur. Where there are no
structural changes, there are no qualitative changes either. The
absence of dynamism in institutional arrangements affected the
structure of regional economies: a rigid system resulted in a rigid
structure which, in turn, had a minimal effect on efficiency.
A comparison between the results obtained by ranking regions
according to their efficiency and those obtained by ranking regions
according to the achieved growth of production factors (employment and
fixed assets) and GNP growth clearly indicates that there was a rapid
growth of production factors in underdeveloped regions. This growth was
made possible by an abundant inflow of capital. However, the way in
which capital flowed into the regions (automatically and without any
control by the donors over its use or investments efficiency) and the
environment in which it was used (soft budget constraint, socialization
of investment risks, zero or minimum price of capital, institutional
and noninstitutional pressure from the unemployed population, etc.)
inevitably led to nonproductive employment, i.e. inefficient
investment. In other words, rapid growth of production factors in year
t did not provide the basis for self-increase in year t+1 but, instead,
created a need for increased external capital in year t+1 in order,
first, to preserve the existing (inefficient) economy and, second, to
ensure new (inefficient) growth.9