Croatia’s Eu Convergence Report: Reaching and Sustaining Higher Rates of Economic Growth,

The causes behind achieving different economic growth rates have been a major focus of economic research for a long time now, the result of which are various growth theories: from the Harrod-Domar model based on the capital accumulation to the modern, endogenous theories that emphasize the role of technological progress (Romer, 1986, 1990 ) and human capital (Lucas, 1988). It is well known that generators of growth differ among countries, and that the strategies applied will depend on country’s specific circumstances and constraints. Individual country potential in achieving higher rates of economic growth and development will primarily depend on its ability to improve the technology and capital used by workers: “Productivity isn’t everything, but in the long run it is almost everything” (Krugman, 1994). Thus, it is not surprising that the report whose review follows specifies total factor productivity (TFP) as critical and hitherto hidden potential for reaching higher rates of economic growth in Croatia. In addition, another important subject within the research of economic growth and development is the issue of convergence, i.e. whether there is a tendency of narrowing the real per capita income gap between rich and poor countries over the long run. There are two aspects of convergence offered in the literature: absolute or beta, and conditional or sigma convergence. Empirical distinction between the two was introduced by Barro and Sala-i-Martin (1995). While the first one assumes that there is a negative relation between initial level and growth rate of per capita income (i.e. the presumption that poorer economies will grow faster than the richer ones), according to the conditional convergence hypothesis, countries converge on different growth paths determined by their own labor force growth and technological progress (Gärtner, 2003). The concept of conditional convergence and the neo-classical growth model are also in the background of the analysis applied in the “Croatia’s EU Convergence Report: Reaching and Sustaining Higher Rates of Economic Growth”.