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The boulevard of broken dreams? Long-run effects of labor-managed socialism

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  • Rok Spruk, Mitja Kovac, Nuno Garoupa

Abstract

This study investigates the long-term impact of socialism on economic growth, focusing on the unique case of labor-managed socialism in former Yugoslavia. By comparing Slovenia with OECD and East Asian donor countries that did not undergo postwar socialist transitions, we estimate counterfactual scenarios using synthetic control methods. Our findings show that labor-managed socialism led to a temporary growth deviation, followed by a structural collapse in the 1980s. Our estimates suggest that Slovenia’s per capita GDP would be 22 percent higher today had there been postwar economic and political liberalization in place. By contrast, if socialist policies had continued after 1990, Slovenia's per capita GDP would be 63 percent lower today. These results remain robust across various robustness checks.

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  • Rok Spruk, Mitja Kovac, Nuno Garoupa, 2024. "The boulevard of broken dreams? Long-run effects of labor-managed socialism," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 21(2), pages 167-210, December.
    • Handle: RePEc:liu:liucej:v:21:y:2024:i:2:p:167-210
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    More about this item

    Keywords

    socialism; economic growth; synthetic control method; comparative long-run development; Slovenia;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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