The European Journal of Comparative Economics

ISSN: 1824-2979

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EJCE Year: 2024, December. Volume: 21 - Issue: 2

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

by Rok Spruk, Mitja Kovac, Nuno Garoupa

Start page: 167 - End page: 210

Keywords: socialism, economic growth, synthetic control method, comparative long-run development, Slovenia

Jel code: C21

DOI: 10.25428/1824-2979/031

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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