Human Capital and Economic Growth by Municipalities in Slovenia

This article presents the analysis of the nature of economic growth of the Slovenian economy at the aggregate level and at the level of Slovenian municipalities for the period 1996–2002. The aggregate cross sectoral time series dataset and the regional cross-sectional time series dataset are used to econometrically test the significance of labour reallocation between sectors and municipalities on the nature of economic growth of the Slovenian economy. For this purpose we compare estimates of average and marginal stochastic frontier production functions. The estimated parameters of these two groups of production functions clearly indicate an inefficient use of human capital in the Slovenian economy during the analysed period. The uncompleted process of sectoral labour reallocation is found as the main factor that has a negative impact on the growth of total factor productivity in the Slovenian economy.