engleski

Can a Change in The Growth Pattern Speed Up The Convergence of Transition Countries Toward EU? - Example of Croatia

In the past, transition countries capabilities to produce goods and services demanded, basically depended on the employment growth and capital formation rate. The level of technological attainment under the central planning was low because of the firms&#8217 ; ; disincentives to innovate, leaving the nation&#8217 ; ; s productive capacity far beyond EU countries. The same was for Croatia. With the present unemployment rate (21, 3%), the actual GNP is largely beyond the potential with the convergence of gap deepening. This paper&#8217 ; ; s aim is dual. The first is to investigate the major sources of the economic growth for Croatia in the past 40 years and the second is to compare actual growth pattern for Croatia with different growth strategies. Then, using the dynamic growth model we will simulate the speed of the Croatian growth convergence for two scenarios ; leaving the overall growth strategy unchanged ; revisiting the growth strategy and formulating the new one. After the key growth determinants identification, an alternative strategy for expanding and improving economy&#8217 ; ; s productive capacity can be set. However, the economy&#8217 ; ; s productive capacity evolution from actual will fondly depend on the private sector growth constraints ; lack of capital and poor banking system functioning. The lack of the conventional wisdom in the mind of the macroeconomic policy creators is the principal reason for the unimpressive growth record of the Croatian economy. Historical but also present growth policies were based on the static growth theory of the resource allocation, labor intensive productive sector and without clear growth scenarios including the identification of the growth advancing production factors.

new growth theory; endogenous growth model; human capital; growth pattern; convergence theory; growth oriented policies; historical growth decomposition

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