Volume 16 (1998)

The Regional Problem and the Break-Up of the State:
The Case of Yugoslavia
Časlav Ocić

The Nature and the Scope of the Regional Problem
Regional Policies and Changes in the Institutional Framework
Regional Development Levels: Grouping of Regions
Structural Change: Shift-Share Analysis
Efficiency: Shift-Share Analysis
Interregional Relations: Autarky
Some Other Results of the Regions' Development
Regional Development Costs: Ratios of Investment
Interregional Income (Re)distribution
Regional Convergence or Divergence?
Equality: The Failure of the Positive Discrimination Model
"The National Question" and Nationalism
Separatism: Economic and Political
A Long Journey from Utopia to Dystopia
Selected Bibliography
Data Sources & Documents
Appendix  (1)  (2)

Efficiency: Shift-Share Analysis

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