The effects of self‐management on Yugoslav industrial growth

MAJOR reforms in 1965 effectively transformed the Yugoslav economic system from decentralised planning to a regulated market, and increased the decision-making autonomy of enterprises which had been nominally self-managed since 1952. There was a break in the pattern of development around the time of these reforms (see Sapir (1980)), but this has been widely regarded as a consequence of the new market system. The additional implications of effective self-management for resource allocation have not been properly considered. This paper will examine whether the observed changes in the pattern of Yugoslav growth after 1965 are consistent with hypotheses which can be developed from the economic theory of self-managed firms. The hypotheses about how self-management could be expected to influence resource allocation in the post-reform Yugoslav environment are developed in the following section. They are based on the theory of self-managed firms (see Ward (1958), Domar (1966), Vanek (1970), Meade (1972)), which suggests that a competitive labour-managed economy will be distinguished from its free-market counterpart by imperfections in the labour market which will prevent market clearing. Co-operative members have the capacity to increase wages above their scarcity value, which will distort the choice of technique towards more capital-intensive and labour-productive methods. The empirical work in the third section examines whether one can observe these phenomena in post-reform Yugoslavia and offers evidence on the choice of technique, labour market clearing and relative input costs. In addition to a deceleration in the trend rate of output growth after 1965, which can be attributed to the introduction of markets, the predicted labour market imperfections do emerge to some extent. However, the approach is empirical, so consistency between hypotheses and observations does not establish the independent influence of self-management on resource allocation. The findings could be explained by alternative hypotheses, a number of which are considered in the final section of the paper. The fact that none provide an entirely satisfactory explanation of our

Business · Cooperative Studies and Economics · Family Business Performance and Succession

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