Impact of the transition on the TFP in Croatia

In this paper we investigate the impact transition had on the total factor productivity in Croatia. The analyzed data cover the period from 1952 to 2008. Our sample is interesting for several reasons. It includes first estimates of physical capital for Croatia in the pretransition period. In addition to new physical capital series used in the estimation of Croatian TFP, labor has been used in three different forms: as raw labor and as labor corrected with two alternative proxies of human capital. The obtained data enable us to investigate how the introduction of market mechanisms in the early nineties affected total factor productivity. After deriving the TFP values using growth accounting methodology, we investigate how the contribution of TFP to GDP growth changed with the beginning of transition. In addition, we conduct structural break analysis, taking into an account, not only transition process but the pretransition period as well. Results suggest that transition had a positive impact on total factor productivity growth rates, but not on the share of TFP in the GDP growth rate.