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Does international trade cause regional growth differentials in Croatia

Author

Listed:
  • Davor Mikulic

    (Institute of Economics Zagreb, Zagreb, Croatia)

  • Andrea Galic Nagyszombaty

    (Croatian Bureau of Statistics, Zagreb, Croatia)

Abstract

The purpose of this research is to investigate the role of international trade in the process of regional convergence in Croatia. Previous empirical and theoretical studies usually argued that international competitiveness and export orientation promotes regional convergence and enables less developed regions to increase economic growth through enhanced productivity and efficiency. The main hypothesis tested is that international trade is less significant in explaining regional growth differentials in Croatia. The method used for the analysis is a panel data model which is based on conditional convergence hypothesis. The model is oriented to identification of factors which explain growth differentials of Croatian counties, including variables related to international competitiveness. The fundamental result obtained is empirical evidence for conclusion that international trade is not to be assumed as a key determinant of the regional convergence process in Croatia. Regional growth in Croatia is primarily determined by quality of human capital, investments in fixed assets and structural features of individual Croatian counties. The main conclusion on the basis of the results is that in the past period, regional growth was primarily determined by domestic demand of households and government. The highest growth was recorded in counties in which public funds were invested in infrastructural projects and counties specialised in production of services for personal consumption. However, the role of international trade in the regional economic growth can be more pronounced in the future as a result of limited domestic demand. Improved international competitiveness is a prerequisite for successful and sustainable regional development.

Suggested Citation

  • Davor Mikulic & Andrea Galic Nagyszombaty, 2015. "Does international trade cause regional growth differentials in Croatia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 33(1), pages 81-102.
    • Handle: RePEc:rfe:zbefri:v:33:y:2015:i:1:p:81-102
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    References listed on IDEAS

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    Cited by:

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    2. Saša Jakšić & Nataša Erjavec & Boris Cota, 2019. "The role of foreign direct investment and labor productivity in explaining croatian regional export dynamics," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 27(3), pages 835-849, September.
    3. Josic Hrvoje & Bašić Maja, 2018. "Reconsidering Zipf’s law for regional development: The case of settlements and cities in Croatia," Miscellanea Geographica. Regional Studies on Development, Sciendo, vol. 22(1), pages 22-30, March.
    4. Chiara Aleffi & Sabrina Tomasi & Concetta Ferrara & Cristina Santini & Gigliola Paviotti & Federica Baldoni & Alessio Cavicchi, 2020. "Universities and Wineries: Supporting Sustainable Development in Disadvantaged Rural Areas," Agriculture, MDPI, vol. 10(9), pages 1-14, August.

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    More about this item

    Keywords

    regional growth; international competitiveness; economic growth; Croatia;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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