MEASURES OF SOVIET GROSS NATIONAL PRODUCT IN 1982 PRICES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92M00732R000300110001-2
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• Document Page Count: 189
• Document Creation Date: December 23, 2016
• Document Release Date: April 15, 2014
• Sequence Number: 1
• Publication Date: August 18, 1989
• Content Type: REPORT

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STAT
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MEASURES OF SOVIET GROSS NATIONAL PRODUCT IN 1982 PRICES
18 August 1989
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18 August 1989
SUMMARY
Western estimates of the size and growth of gross national
product (GNP) in the USSR were first developed several decades
ago, largely as a result of skepticism about the reliability of
official Soviet summary statistics. These independent estimates
remain necessary to remedy the shortcomings of such official
measures. This paper describes the methods currently used by the
Central Intelligence Agency (CIA) to estimate Soviet GNP and
presents our latest numerical estimates--including an update of
the ruble price base from 1970 to 1982. In addition, problems of
estimation are discussed and the reliability of the results is
assessed.
Methods of Estimation
The CIA's estimates of Soviet GNP are based on the same
concept used in the United States and other Western countries:
the total value of goods and services sold to final purchasers
during a given period of time. Our initial estimates of GNP,
like official Soviet statistics, are valued in established
prices--that is, prices set or authorized by central officials.
These prices, however, have deficiencies that prevent them from
reflecting the allocation of economic resources accurately, so we
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convert them to adjusted factor costs. In the conversion
process, we subtract turnover and other indirect taxes--which
sharply raise selected prices, mainly of alcohol and manufactured
consumer goods--and add subsidies--which keep other prices
artificially low, especially for food and basic consumer
services. Next, because the profit margins included in
established prices are often arbitrary, reported profits are
removed from GNP. Finally, a calculated return on capital--at a
rate currently assumed to be 12 percent--is added back in an
effort to reflect the productivity of capital in the economy.
We estimate the growth of total GNP as an average of indexes
of the growth' of its components weighted by their base-year
values at adjusted factor cost. The growth of each component is
estimated using a sample of output, which may be based on two
major kinds of Soviet data:
o Data on quantities of output in physical units--such as
tons, items, or square meters--which are multiplied by
base-year prices to obtain values.
o Data on values of output in prices officially described
as "comparable," which are supposed to measure output
excluding the effects of price'changes, as Western
economic statistics in constant prices do.
Both kinds of data have shortcomings. Over the years,
Western studies of Soviet quantity data have generally found them
reliable as indicators of changes in the physical volume of
output. Research on the measurement of real growth, however, has
shown that data on physical quantities often do not capture the
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full extent of changes in product mix and quality. Also, in a
variation on the use of physical output data, data on labor
inputs--measured in work hours--are used to estimate the growth
of a number of services for which no output statistics are
available. These input data do not reflect increases in labor
productivity.
Almost all Western experts, and now most Soviet economists,
believe that value data in comparable prices overstate growth
because they include a substantial degree of disguised inflation.
This inflation has two main sources. First, producers benefit
financially from making minor changes in familiar products and
using these "improvements" as an excuse for increasing prices.
When production of older, cheaper items is stopped at the same
time, purchasers are left with little choice but to accept the
new ones. Second, even products reflecting genuine improvements
are assigned high prices at first to cover the research,
development, and other costs of the initial stages of production.
These prices are supposed to be reduced after a few years, but
producers typically try to keep any reduction as small as
possible and to Postpone it as long as possible.
Reliability of Estimates
In the last few years, questions about the reliability of
our estimates of Soviet GNP have been raised on two main fronts.
Some Western researchers have focused on the potential
understatement of growth resulting from our use of quantity data.
iii
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Criticisms of official Soviet statistics by Soviet and Western
economists, on the other hand, have called attention to potential
overstatement in the value data we use in estimating growth--and
possibly in some of the quantity data as well.
On balance, we believe that our estimates of total GNP
growth are reasonably accurate, partly because errors in opposite
directions offset each other to some extent. The growth
estimates for certain components of GNP, however, are subject to
greater potential bias--that is, consistent overstatement or
understatement--than we would like:
o Machinery output growth probably is biased upward because
the sample on which it is based includes a substantial
share of Soviet value data.
o Growth of the machinery component of investment also is
based on value data and is likely to be overstated.
o Housing growth is estimated on the basis of living space-
-without allowance for improvements in amenities--and is
very likely to be biased downward.
o Growth estimates for education, health, and government
administrative services almost certainly are understated
because they are based on labor inputs, which do not
reflect gains in productivity.
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Potential Impact of Changes in Soviet Statistics on GNP Estimates
The availability of detailed economic data, such as those
used in estimates of GNP growth, has improved under General
Secretary Gorbachev's policy of glasnost. Nonetheless, glasnost
has not eliminated the need for estimates that do not depend on
official Soviet summary statistics. As recent Soviet critics
have reminded us, often with striking illustrations, those
statistics continue to be valued in prices that do not accurately
reflect the costs of economic resources and that include a
substantial degree of disguised inflation.
Meanwhile, the Soviet statistical system is under increasing
pressure to collect new kinds of data and to improve the measures
of economic performance derived from both new and existing data.
Such changes may eventually improve the reliability of many
official statistics. In the interim, however, users will need to
watch closely for changes in definition and coverage and probably
adapt to the replacement of familiar measures by new ones.
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Contents
Summary
Introduction
Soviet Economic Development in a Western Perspective
Major Trends in GNP in 1982 Prices
Slowdown of Economic Growth
Competition for Resources
Results of Move to New Price Base
Methods of Estimation
Overview of Estimating Methods
Base-Year GNP
GNP Growth
Base-Year GNP in Established Prices
Basic Income and Outlay Accounts
End Use Residual
Determination of Total GNP
Imputations
Sources of Data
Contribution of Second Economy
Comparison With US Methods
Factor Cost Adjustment of Base-Year GNP
Valuation of GNP
Adjustment of GNP by Sector of Origin
Adjustment of GNP by End Use
Sources of Data
Results of Adjustment
Growth of GNP
Detailed Weights for Growth Estimates
Growth of GNP Components: Changes in Procedure
Industry
Repair and Personal Care
Recreation
vi
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Reliability of Estimates of Growth
Growth by Sector of Origin
Adequacy of Samples
Kinds of Data in Samples
Quantity Data
Value Data
Proxies for Value Added
Gross Output
Intermediate Inputs
Labor Inputs
Criticisms of Estimates
Industry
Services
Potential Impact of Errors
Industry
Services
Growth by End Use
Consumption
Investment
Base-Year Weights
Labor Income-
Returns on Capital and Land
Net Impact of Errors on Total GNP Growth
Comparisons With Soviet Estimates
Results of Sensitivity Tests
Avenues for Improvements in Estimates
Glasnost, Perestroyka, and Soviet Statistics
vii
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18 August 1989
MEASURES OF SOVIET GROSS NATIONAL PRODUCT IN 1982 PRICES
The measurement of national income, it has been said,
is an art rather than a science. If this is so (and
few practitioners would disagree), for Russian national
income it may be felt the art must even assume an
occult character. Is it really worth while to attempt
such measurements in this case? . . . Great as the
difficulties are, they do not appear to be
overwhelming. With sufficient care and industry, it
should be possible to limit the range of conjecture,
and even uncertain knowledge may be highly valuable on
a vital theme.
Abram Bergson
The Real National Income of
Soviet Russia Since 1928
INTRODUCTION
The purpose of this paper is to describe the methods
currently used by the Central Intelligence Agency (CIA) in its
estimates of Soviet gross national product (GNP), especially
e
methods that have changed since our last comprehensive
publication on the subject (henceforth, USSR: Measures).1 The
1Joint Economic Committee, Congress of the United States, USSR:
Measures of Economic Growth and Development, 1950-80 (Washington:
US Government Printing Office, 1982). The volume consists of
chapters by John Pitzer on GNP overall, by Ray Converse on
industrial production, by Barbara Severin and Margaret Hughes on
agricultural production, and by Gertrude E. Schroeder and M.
Elizabeth Denton on consumption.
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latest estimates--including an update of the ruble price base
from 1970 to 1982--also are presented.2
Since the publication of USSR: Measures, questions have
been raised--directly and indirectly--about the reliability of
our GNP estimates. Recent criticisms of official Soviet
statistics by Soviet and Western economists have called attention
to the possible impact of deficiencies in some of the Soviet data
we use. In addition, several Western researchers have questioned
various aspects of our estimation methods. We hope this paper's
exposition of methods and discussion of problems of estimation,
which address these issues, will encourage further comments and
suggestions for improvements.
The main body of this paper begins with a brief review of
the rationale for and the results of our current estimates of
Soviet economic growth. The major trends shown by GNP estimates
in 1982 prices are summarized, and differences from estimates in
1970 prices--generally small--are noted. Next, our methods of
estimating Soviet GNP are described, including procedural changes
connected with the new price base. The essentials of methods
already covered in USSR: Measures are summarized for the
2The GNP estimates in this paper reflect the structure and growth
of the Soviet domestic economy in constant ruble prices. The CIA
also uses dollar prices--along with ruble prices--to compare the
size of Soviet GNP with that of GNP in the United States and
other Western countries. For discussions of GNP comparisons,
which are outside the scope of this paper, see Imogene Edwards,
Margaret Hughes, and James Noren, "U.S. and U.S.S.R.:
Comparisons of GNP," in Joint Economic Committee, Congress of the
United States, Soviet Economy in a Time of Change (Washington:
US Government Printing Office, 1979); and Gertrude E. Schroeder
and Imogene Edwards, Consumption in the USSR: An International
Comparison, prepared for the Joint Economic Committee of Congress
(Washington: US Government Printing Office, 1981).
2
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convenience of the reader, but details discussed there are not
addressed in this paper. This description of estimation methods
is followed by a discussion of the degree of confidence we place
in the growth estimates. Criteria for reliable estimates of
economic growth are reviewed, and the extent to which CIA
estimates satisfy these criteria is evaluated. Finally, the
potential impact of ongoing changes in Soviet statistics on our
GNP estimates is discussed.
3
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SOVIET ECONOMIC DEVELOPMENT IN A WESTERN PERSPECTIVE
For decades Western researchers have been skeptical of the
reliability of official Soviet summary statistics; independent
Western estimates of GNP are designed to remedy some of the
shortcomings of these official figures (see inset). One of the
major shortcomings is the presence of disguised inflation in
measures that should reflect real economic growth--that is,
exclude the effects of price changes. This problem is avoided
whenever possible by using detailed production data--usually in
physical units--to track changes in output. GNP also is revalued
in an effort to correct some of the distortions of established
prices--that is, prices set or authorized by Soviet officials.
The resulting values--called adjusted factor costs (or simply
factor costs) reflect the distribution of labor and capital
resources more accurately than established prices do.
Traditional Soviet aggregate measures, moreover, have omitted
depreciation and services--except those that contribute directly
to output of material goods. GNP estimates by Western
economists--and now also by Soviet statisticians (see inset)--
include depreciation and services.
To measure the real growth of Soviet GNP, quantities of
output produced in a series of years are valued at prices of a
fixed base year. This base year should be close enough to the
present so that prices approximate current trade-offs between
competing uses of economic resources. When we began work on a
4
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INSET
Western Estimates of Soviet GNP
Research on Soviet GNP was pioneered by Abram Bergson in the
1940s and developed by him and his colleagues under the
sponsorship of the RAND Corporation during the 1950s and 1960.a
Bergson's initial work involved estimating GNP in current
established prices and adjusting those estimates in an effort to
correct some of the distortions of the Soviet pricing system.
His adjusted factor cost values were intended to reflect the
costs of labor and capital resources used in the economy--the
factors of production--better than established prices could.
Subsequently, RAND scholars estimated price indexes that were
used to derive measures of GNP growth in constant prices.
Bergson also has used these building-block studies of GNP as a
basis for comparing levels of economic activity in the USSR and
other countries and for analyzing Soviet productivity.
After the RAND Corporations's research on Soviet GNP
concluded in the late 19605, the CIA--where classified work on
the subject began in the early 1950s--became the principal source
of Western estimates. Recent CIA efforts have concentrated
largely on constant price measures of Soviet economic growth,
although Soviet GNP in current prices also is estimated for
aThe RAND studies are summarized by Bergson in The Real National
Income of Soviet Russia Since 1928 (Cambridge, Mass.: Harvard
University Press, 1961), pp. vii-ix; and by Abraham Becker in
Soviet National Income, 1958-1964 (Berkeley and Los Angeles:
University of California Press, 1969), pp. 1, 578. USSR:
Measures (pp. 11-12, 26) also discusses estimates of Soviet GNP
by RAND Corporation and other researchers outside the CIA.
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selected years. Because of changes in the availability of data,
our present approach to estimating growth differs from that used
by Bergson and his associates in two major ways. First, we
primarily use data on changes in quantities of output weighted by
base-year values, rather than data on changes in current values
of output deflated by price indexes. Second, our estimates of
the growth of total GNP are determined as a weighted average of
growth rates estimated for industry and the other sectors in
which GNP is produced. In contrast, in the Bergson-RAND
approach, total GNP growth was a weighted average of estimates of
the growth of purchases for consumption and other uses of GNP.
END INSET
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INSET
New Soviet Official Statistics on GNP
Official Soviet measures of aggregate economic performance,
because they are based on Marxian concepts, have long excluded
depreciation and services that do not contribute directly to
output of material goods. The traditional measures are often
called net material product (NMP) to indicate these exclusions.
Early in 1987, however, the Soviet State Committee for Statistics
began publishing estimates of GNP--as the measure is defined by
Western economists--in recent years.a So far, these Soviet GNP
statistics have been derived by adding depreciation and
nonmaterial services to NMP. Work on developing more detailed
GNP estimates is under way.
From the Soviet estimates of GNP released so far, the
official value of total GNP in current established prices appears
a little lower than CIA estimates. The new Soviet statistics on
GNP growth, however, are subject to about the same extent of
disguised inflation as traditional NMP growth statistics (see
aOfficial GNP figures were first released in the yearend report
on 1987 economic performance; see Pravda (24 January 1988).
Estimates for additional years are published in the short
statistical yearbook presenting data through 1988; see SSSR v
tsifrakh v 1988 godu (USSR in Figures in 1988; Moscow: Finansy i
statistika, 1989), pp. 5, 9, 14. Soviet methods of estimating
GNP are discussed in "Metodika ischisleniya valovogo
natsional'nogo produkta SSSR" (Methods of Calculating the Gross
National Product of the USSR), Vestnik statistiki (No. 6, 1988):
pp. 30-42; and Yu. Ivanov, B. Ryabushkin, and M. Eydel'man,
"Ischisleniye valovogo natsional'nogo produkta SSSR" (Calculating
the Gross National Product of the USSR), Vestnik statistiki (No.
7, 1988): pp. 32-38.
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table). Because GNP is presently derived from NMP, this is not
surprising.
Average Annual Growth
1981-85
Percent
Annual Growth
1986 1987
GNP
Soviet
4.0
4.6
3.3
CIA
1.9
4.0
1.3
NMP
Soviet
3.6
4.1
2.3
CIA
1.7
3.5
1.4
END INSET
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new price base (1982), our previous base year (1970) was becoming
outdated. Major changes had occurred in the relationships among
Soviet prices:
o Industrial prices were revised on 1 January 1982,
following less comprehensive changes in the mid-1970s.
o Agricultural prices were increased several times,
starting in the late 1970s.
o Construction prices were raised on 1 January 1984, in
order to incorporate the new industrial prices.
The shift to a 1982 price base captures the new industrial prices
and all of the price increases in agriculture except the last
ones in 1983, but not the new construction prices.
Major Trends in GNP in 1982 Prices
Although the new price base has changed our numerical
estimates of GNP growth--generally by small amounts--it has not
altered our perception of the major patterns of economic
development in the USSR. This stability of the estimates
indicates that the price changes that occurred between 1970 and
1982 were not sharp enough to lead to substantial differences in
the relative importance of the detailed output data on which GNP
growth depends.
Slowdown of Economic Growth. The Soviet economy has made
substantial gains since the end of World War II, but its growth
has slowed--gradually at first and more sharply in the last
decade. Total GNP--measured in constant 1982 prices--roughly
quadrupled from 1950 to 1987. Annual rates of increase in GNP
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averaged slightly more than 4.5 percent from 1950 to 1975 but
fell to about 2 percent from 1975 to 1987 (see table 1 and figure
1).3 Although there have been improvements in the functioning of
some parts of the economy since the final Brezhnev years, it is
too early to predict the effects on GNP growth of General
Secretary Gorbachev's efforts to reform the economic system,
which are just beginning.
Industry, traditionally a major source of growth in the
Soviet economy, contributed heavily to the slide in GNP growth
during the past decade. Average annual rates of increase in
industrial production fell from 5.8 percent during 1966-75 to 2.2
percent in 1976-82 but picked up slightly in 1983-87.
The decadelong slowdown of growth has frustrated Moscow's
efforts to overtake the United States in the production of goods
and services. Soviet GNP, which rose from roughly 35 percent of
the US level in 1950 to nearly 60 percent in 1975, currently is
about 55 percent of US GNP.4 The USSR's progress toward
3All estimates are subject, in varying degrees, to errors and
uncertainties that are discussed below, in the section,
"Reliability of Estimates of Growth." In the present section,
estimates are valued at 1982 factor cost, rather than in Soviet
established prices.
See appendix A for tables of GNP estimates from 1950 through
1987. These tables show the major components of GNP by sector of
origin--such as industry, agriculture, and services--and by end
use--such as consumption, investment, and government spending,
including defense.
4These ratios represent the geometric mean of a comparison using
US market prices (dollars) as weights and another comparison
using Soviet established price weights (rubles). The base year
for both the dollar and the ruble price weights is 1982. Each
country's GNP appears smaller when weighted by its own prices
because each produces relatively larger quantities of goods that
are relatively cheaper in terms of its own resources.
Comparisons in both sets of prices are valid, but the geometric
6
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Table 1
USSR: GNP Growth by Sector of Origin, 1951-87a
Average Annual Rates
1951-65 1966-75 1976-80
1981-85
1986
1987
Total GNP
5.0
4.0
2.1
1.9
4.0
1.3
Industry
7.9
5.8
2.4
2.0
2.7
3.1
Ferrous metals
8.8
4.7
1.0
0.8
3.3
1.6
Nonferrous metals
8.9
6.7
1.5
2.0
3.0
1.9
Fuel
8.4
5.3
3.1
0.9
3.5
1.9
Electric power
12.0
7.5
4.5
3.1
3.6
4.1
Machinery
7.3
6.7
3.0
2.0
2.9
3.7
Chemicals
11.0
8.3
3.0
3.8
4.8
2.6
Wood, pulp, & paper
5.1
2.6
-0.4
1.9
4.6
4.5
Construction materials
12.2
5.7
0.9
1.8
4.0
3.4
Light industry
6.2
4.5
2.4
1.6
1.4
1.7
Food industry
8.4
5.0
1.4
1.8
-4.9
3.6
Other industry
7.9
5.8
2.4
2.0
2.7
3.1
Construction
8.7
5.5
2.4
2.2
3.8
2.4
Agriculture
3.0
0.5
0.2
1.2
10.3
-4.0
Transportation
11.5
6.8
3.6
2.2
3.0
1.2
Communications
7.7
7.5
4.7
3.9
5.5
6.8
Trade
7.8
5.9
2.7
1.8
0.3
2.1
Services
3.7
3.8-
2.6
2.2
2.3
3.2
Housing
3.8
2.8
2.1
2.6
2.7
2.9
Utilities
7.5
5.3
4.9
4.9
4.4
4.2
Repair & personal care
5.0
6.0
4.8
3.9
4.0
7.0
Recreation
8.6
3.7
1.7
1.6
0.5
1.4
Education
3.9
3.0
2.2
1.5
2.3
3.0
Health
4.4
3.1
1.4
1.7
1.5
3.0
Science
9.3
6.2
3.4
1.5
1.3
3.3
Credit & insurance
-0.4
5.7
4.3
0.8
-1.3
0.6
Govt administration
-1.5
4.4
2.9
1.5
1.5
1.7
Military personnel
-0.5
2.6
1.6
0.9
0.4
0.0
Other branches
5.0
4.0
2.1
1.9
4.0
1.3
aBased on value added at 1982 factor cost. In this and the following
tables, average annual rates of growth are calculated as compound
rates of change from the year immediately before the start of the
period specified to the last year of the period.
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achieving Western standards of living also has stalled in the
last decade, although it has maintained its status as a military
superpower.
Competition for Resources. Competition intensified among
the major claimants on GNP--investment, defense, and consumption-
-as Soviet economic growth slowed after the mid-1970s. Through
1987, however, Moscow's priorities appeared to change little, as
the shares of GNP allocated to these claimants remained much the
same--in current prices--after 1970.5
Planners allowed the rate of investment growth to slow
markedly after 1975. Annual rates of increase in investment
slipped from an average of 5.3 percent per year during 1966-75 to
3.6 percent during 1976-85. Gorbachev's modernization campaign
raised investment growth in 1986, but the faster pace was not
sustained in 1987 (see table 2). Rates of increase in the
machinery component of investment also declined as the growth of
machinery output fell, even though imports helped cushion the
impact on investment of shortfalls in domestic production.
The growth of defense spending decreased from an average of
about 5 percent per year from 1965 to 1975 to less than 2 percent
mean provides a convenient single estimate of proportion. See
CIA Reference Aid, Handbook of Economic Statistics, 1988 (CPAS
88-10001, September 1988), p. 32.
5Priorities in allocating resources are assessed using GNP valued
at current factor cost--rather than the constant 1982 values used
in estimating growth--because decisions about spending generally
reflect the resource trade-offs in effect at the time. Factor
cost values are used because they give a more accurate picture of
the relative costs of economic resources than established prices
do.
7
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Table 2
USSR: GNP Growth by End Use, 1951-87a
Average Annual Rates
1951-65 1966-75
1976-80
1981-85
1986
1987
Total GNP
5.0
4.0
2.1
1.9
4.0
1.3
Consumption
4.6
4.4
2.5
2.0
1.7
2.7
Consumer goods
4.4
4.6
2.4
1.8
1.3
2.3
Food
3.8
3.8
1.5
1.3
-0.9
1.7
Animal products
4.2
4.6
1.3
1.8
2.2
3.7
Processed foods
7.9
3.4
3.5
1.2
4.2
5.8
Basic foods
1.5
1.3
0.8
2.0
5.4
-0.3
Beverages
7.8
6.0
2.6
-1.9
-30.6
-10.3
Soft goods
7.1
5.9
3.7
2.2
3.2
1.3
Durables
12.3
10.6
6.3
3.9
11.6
6.5
Consumer services
5.0
4.0
2.7
2.6
2.5
3.5
Investment
9.7
5.2
3.8
3.3
5.4
1.2
New fixed investmentb
9.6
5.2
3.5
3.5
6.6
0.6
Machinery & equipment
11.5
8.2
6.5
4.6
6.9
1.3
Construction & other
8.3
5.6
1.3
2.8
4.9
2.9
Capital repair
10.3
5.2
5.1
2.7
1.2
3.6
Other government outlays
2.9
1.4
-2.1
-1.9
11.2
-4.1
Govt admin services
-1.5
4.4
2.9
1.5
1.5
1.7
Research & development
9.3
6.2
3.4
1.5
1.3
3.3
Outlays n.e.c.c
3.2
0.0
-5.2
-4.8
21.4
-9.9
aBased on 1982 factor cost.
bBesides the line items shown, new fixed investment includes net
additions to livestock, for which growth is not shown because swings
between negative and positive values make rates of change difficult to
interpret.
cIn this and the following tables, n.e.c. is the abbreviation for not
elsewhere classified.
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annually from 1975 to 1987, roughly paralleling the slowdown in
overall economic growth. This trend in defense outlays reflected
primarily a leveling off in procurement of weapons (currently
about half of all military expenditures) during the late 1970s
and early 1980s. Still, the share of defense spending in GNP
rose slightly--when both are measured in current prices--as
prices of military output increased faster than prices of
civilian goods.
The standard of living of the population continued to rise,
but the rate of improvement slowed markedly after 1975. Annual
growth of per capita consumption averaged 1.3 percent during
1976-87, down from 3.4 percent during 1966-75. As a result, the
level of per capita consumption in the USSR fell further behind
that in the United States and other major Western countries.
Soviet food consumption grew more slowly than consumption of
services and other goods. Although this is typical in countries
with rising standards of living, improvements in the availability
of food supplies were disappointing nonetheless. Continuing
problems in agriculture affected consumers, as poor harvests
depressed gains in consumption of food (after a lag of a year or
two). In fact, until Gorbachev began his campaign against
drinking in 1985, alcoholic beverages registered some of the
fastest increases in food consumption (including beverages). In
1986-87, however, the impact of a sharp drop in alcohol supplies
was more than offset by substantial increases in consumption of
food other than beverages.
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Results of Move to New Price Base
The shift in the price base for our GNP estimates implies
that the Soviet economy experienced inflation at an average rate
of a little over 2 percent per year between 1970 and 1982. This
rate is calculated by dividing the current value of total GNP in
1982 by the same quantity of output valued in 1970 prices and
computing the average annual rate of change in the resulting
price index.
In addition, our estimates of Soviet GNP growth in 1982
prices differ in two important ways from estimates in 1970
prices. First, rates of real growth are lower for total GNP and
most major components. This result, which reflects the "index
number effect," is to be expected when prices of a more recent
year are used to calculate growth rates (see inset). In
converting estimates of US GNP from 1972 prices to 1982 prices,
for example, the Department of Commerce found lower rates of
growth for the United States when later-year prices were used.
Second, shares of key components in GNP have changed because
these components experienced different rates both of real growth
and of price change.
Shifting the price base from 1970 to 1982 has reduced annual
rates of increase of GNP by a few tenths of a percentage point in
the 1980s (see table 3). The differences are a little larger in
earlier years--roughly half a percentage point in the 1970s.
Like real growth rates of total GNP, rates estimated for most key
producing sectors are also lower when the new price base is used,
although there are exceptions.
9
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INSET
The ?Index Number Effect,.
Measured economic growth is likely to be lower, the more
recent the price base used in the calculation. Consider an
example, in which we are to estimate real growth in the output of
precision instruments--a group of products ranging from clocks to
automation equipment to computers. Depending on the base year
chosen, the relative prices of individual products in this group
will differ because of differences in technology, scale of
production, and input costs. In particular, the prices of the
products whose quantities are growing fastest--like computers--
tend to fall relative to other prices because of more rapid gains
from advances in technology and economies of scale. Moreover,
purchasers of precision instruments attempt to increase their use
of products that are becoming relatively cheaper--to the extent
possible, given the inflexibility and chronic shortages of the
Soviet supply system.
Product
1970
1982
Price
Quantity
Price
Quantity
Clocks
10
200
20
300
Automation
equipment
20
100
30
250
Computers
30
50
35
200
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Therefore, the fastest growing products will have smaller
weights--and hence less impact on average growth of the group--
when the prices of a later base year are used to calculate real
output than they would if an earlier base year were used.
Price Weights
Quantity Index (1970 =
100)
1970
(10x300) + (20x250) + (30x200)
=
14000
=
255
(10x200) + (20x100) + (30x50)
5500
1982
(20x300) + (30x250) + (35x200)
=
20500
=
234
(20x200) + (30x100) + (35x50)
8750
END INSET
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Table 3
USSR: GNP Growth in 1970 and 1982 Prices, 1951-84a
Average Annual Rates
Total GNP
1970 prices
1982 prices
Industry
1970 prices
1982 prices
Construction
1970 prices
1982 prices
Agriculture
1970 prices
1982 prices
Transportation
1970 prices
1982 prices
Communications
1970 prices
1982 prices
Trade
1970 prices
1982 prices
Services
1970 prices
1982 prices
Military personnel
1970 prices
1982 prices
Other branches
1970 prices
1982 prices
1951-60 1961-70 1971-80 1981-84
5.6 5.2 3.2 2.4
5.1 4.8 2.6 2.1
9.2 6.5 4.7 2.8
8.6 6.3 4.0 2.0
11.2 5.5 3.7 1.9
10.7 5.1 4.0 2.1
3.8 3.2 -0.9 2.7
3.1 3.1 -1.1 2.5
11.8 7.8 5.0 2.1
12.3 8.5 5.1 2.2
7.6 8.0 6.5 4.4
7.9 8.0 5.5 3.7
9.0 5.9 3.8 2.3
9.3 5.9 3.7 1.9
2.8 4.2 3.1 2.1
3.2 4.3 3.0 2.2
-4.3 3.8 1.9 0.2
-1.7 2.6 1.7 1.1
5.6 5.2 3.2 2.4
5.1 4.8 2.6 2.1
aBased on value added at factor cost of the base year shown.
Differences in growth rates reflect changes in methods of estimation--
for example, in the procedures used to convert established prices to
factor cost--as well as in the price base. The change in the price
base, however, is generally the most important source of these
differences.
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The shares of Soviet GNP originating in the two largest
producing sectors--industry and agriculture--have changed as a
result of the shift to a new price base (see table 4). The real
growth of industry from 1970 to 1982 was faster than that of
total GNP, as can be seen from the increase in industry's share
of GNP with prices held constant (first and second columns of
table 4, or table 3). On the other hand, inflation in industry
was less than in the rest of the economy, as shown by the decline
in industry's share of GNP in 1982 when the price base changes
(second and third columns of table 4). In agriculture, in
contrast, real output grew only slightly, but increases in
resource inputs, and in costs of producing farm output, were
steep.
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Table 4
USSR: Changes in Shares of Major Sectors of Origin
as Result of Shift in Price Base, 1970-82a
Estimates for 1970 Estimates for 1982
1970 Prices 1970 Prices 1982 Prices
Total GNP 100.0 100.0 100.0
Industry 32.0 36.8 32.4
Construction 7.3 7.6 7.8
Agriculture 21.1 14.3 20.6
Transportation 8.7 10.4 9.5
Communications 0.9 1.2 0.9
Trade 7.3 7.7 6.5
Services 20.5 20.2 20.1
Military personnel 1.9 1.6 1.9
Other branches 0.3 0.3 0.3
aBased on value added at factor cost of the base year shown.
Differences in shares reflect changes in methods of estimation--for
example, in the procedures used to convert established prices to
factor cost--as well as in the price base. The change in the price
base, however, is generally the most important source of these
differences.
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METHODS OF ESTIMATION
In estimating Soviet GNP, the CIA attempts to replicate as
closely as possible the measures familiar to users of the
economic statistics of the United States and other Western
countries. This attempt is complicated, however, by the Soviet
government's traditional reluctance to divulge information
readily available in the West. Even without this complication,
differences in the statistical systems of planned and market
economies would make it difficult to find for the USSR all of the
same kinds of data that are published in Western countries.
Soviet data are oriented primarily toward supplies of output by
producers, for example, while many of the basic data for measures
of US GNP reflect demands for output by consumers, investors, and
other purchasers.
The essential features of our methods of estimating Soviet
GNP in 1982 prices are summarized in this section. After an
overview, the discussion proceeds along the lines illustrated in
figure 2. The estimation of base-year GNP in established prices
is described first, and our methods of adjusting these estimates
to factor cost are outlined next--with special attention to
revisions in earlier procedures. Then our methods of estimating
GNP growth are reviewed. Because most of these methods have not
changed since being described in detail in USSR: Measures, the
discussion here is limited to those components for which
estimates are based on new kinds of data and new procedures.
11
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Base-Year Estimates
Household
incomes
- -? - - ? - -?
Public sector
incomes
Household
outlays
? ? - - - - - --
Public sector
outlays
Total GNP in
established prices
Breakdowns by
- - - - - - -
I
Type of 1 End
income i use
Sector of
or
- -
Total GNP at
factor cost
Breakdowns by
Sector of 1 End
origin use
Figure 2
Overview of Estimation of Soviet GNP
Growth of Components
Sample of products
Base-year Given-year
price quantity
Constant-pr ice value
Growth of Total GNP
(Incl Subtotals)
\
?41
r
Growth of total GNP
(established prices)
-1
1
I
:
1
?
(Linking
weights)
r
1
1
Growth of
component
Growth of total GNP
(factor cost)
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Overview of Estimating Methods
The estimation of Soviet GNP involves two main stages: (1)
developing a comprehensive set of estimates for the base year
(1982) and (2) calculating growth indexes from data on changes in
the components of GNP. The coverage of economic activity in the
base year is as complete as possible; the growth estimates,
however, depend on samples of products. The full detail of the
base-year estimates is not updated annually because it requires
painstaking searches of Soviet journals and monographs, which
rarely provide data on an annual basis.
Base-Year GNP. In estimating Soviet GNP, we start from the
same concept used in the United States and other Western
countries: the total value of goods and services sold to final
purchasers during a given period of time. Following Western
conventions, output is counted only once, at the time of final
sale. Intermediate sales--for example, of iron ore, rolled
steel, and automobile chassis--are excluded from GNP because the
value of the products is reflected in subsequent sales to final
purchasers--in this example, of automobiles.
Base-year estimates are made for total GNP and its
components by category of end use and by sector of origin. The
end-use breakdown shows the distribution of output to final
purchasers for uses such as consumption, investment, and
government spending, including defense. In the breakdown of GNP
by sector of origin, income resulting from the production of
12
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final output is allocated among sectors such as industry,
agriculture, and services.6 This income--or value added--
consists of the earnings of labor and capital--the primary
factors of production--including depreciation, but excluding
intermediate purchases.
Total value added by sector of origin is identical to total
GNP by end use because (see figure 3):
o Standard accounting procedures make the sum of all gross
output produced in the economy--including intermediate
sales--equal to the sum of all income generated in
production--including intermediate purchases.
o The sum of intermediate sales excluded from GNP by end
use reflects the same transactions as the sum of
intermediate purchases excluded from GNP by sector of
origin.
So the difference between total gross output and total
intermediate output--or total end use--matches the difference
between total gross income and total intermediate input--or total
value added.
Base-year estimates of GNP are valued initially in Soviet
established prices, which are the actual prices paid by final
purchasers. These prices, however, have several shortcomings
that prevent them from reflecting the allocation of economic
resources accurately:
6Throughout this paper, the coverage of the industrial sector
matches that used in Soviet official statistics. It comprises
mining, manufacturing, and utilities as the scope of those
activities is understood in the United States.
13
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Sector
Industry
Construction
Agriculture
Transportation
Communications
Trade
Services
Military personnel
Other branches
INTERNED PURCHASES
VALUE AODED
Figure 3
Framework for Base-Year Estimates of Soviet GNP
Industry Construc Agricul Other INTERNED
tion Lure Branches SALES
INTERMEDIATE SALES
AND PURCIWISES--
EXCLUOE0 FROM GNP
Consump Invest Defense Other Net END GROSS
tion sent Govt. Esports USE OUTPUT
SUM OF CONSUMPTION, NET EXPORTS
= GNP BY END USE
=
GROSS OUTPUT
SUM OF VALUE AODED BY
INOUSTRY, ..., OTHER BRANCHES
= GNP BY SECTOR OF ORIGIN
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O Substantial turnover and other indirect taxes--including
import duties--are levied on selected products, mainly
consumer goods such as automobiles, clothing, and
alcohol.
o Subsidies keep prices artificially low for basic consumer
needs like bread, meat and dairy products, and housing.
o Reported profits are an unreliable indicator of the
contribution of capital to production because they
reflect arbitrary margins set by officials in charge of
central price formation, rather than competitive market
conditions.
Therefore, in an attempt to approximate better the value of
resources used in production and allocated to end uses, we adjust
our estimates of Soviet GNP from established prices to factor
cost. The goal of this adjustment is to make value added in each
major sector of origin reflect as closely as possible that
sector's use of labor and capital resources. Wages in
established prices are accepted without adjustment because they
are believed to reflect labor productivity differences reasonably
well (as explained below). Official data on enterprise
depreciation payments also are accepted, largely because little
alternative information is available to measure wear and tear on
the stock of plant and equipment. But the rest of value added in
established prices--indirect taxes, subsidies (a negative entry),
and profits--is not a good measure of returns on capital. These
elements are subtracted from base-year estimates of value added
in established prices (or added in the case of subsidies), and
14
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returns on fixed and working capital are added back. The rate of
return is assumed to be uniform in all sectors at 12 percent,
intended to reflect capital productivity (as explained below).
Finally, the effects of the factor cost adjustment on GNP
estimates by sector of origin are traced through the production
process to the end-use side of GNP.7
GNP Growth. Base-year estimates of Soviet GNP at factor
cost are used as weights for estimates of GNP growth.8 First,
indexes of growth are estimated for the major components of GNP.
In principle, the growth of total GNP then can be calculated as a
weighted average of growth of the components either by sector of
origin or by end use. In practice, total GNP growth is
determined by the sector-of-origin estimates (see figure 4).9 We
believe this approach produces the more reliable results because
7Estimates of GNP by end use are adjusted to factor cost with the
aid of an input-output table, which shows linkages similar to
those illustrated in figure 3. These linkages make it possible
to determine not only the direct effects of changes in estimates
of value added in, say, metallurgy, but also the indirect effects
of such changes on output of machinery and other sectors using
metals as inputs.
8Factor cost weights are preferred for most analytical purposes,
but estimates in established prices also are used as weights for
some calculations of growth. Consumption trends should be
analyzed in established prices, for example, to reflect choices
among goods and services available to consumers and to compare
purchases with consumers' incomes.
9In this paper, the term "growth" can refer to estimates in the
form either of index numbers (set equal to 100 in the base year)
or of annual rates of increase or decrease (in percent). In our
calculations of total GNP growth, for example, indexes for each
sector of origin are multiplied by sectoral value added in the
base year, and the resulting values in constant prices are
summed. Indexes and annual rates of change of GNP are then
calculated from these values.
15
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Figure 4
Basis for Calculating Soviet GNP Growth
Base-Year Value X Index of Growth = Given-Year Value at
at Factor Cost Constant Factor Cost
Sector
1
Sector
1
Sector
1
+
Sector
2
Sector
2
+
Sector
2
+
Sector
3
Sector
3
+
Sector
3
? ? ?
+ Sector N
Sum = GNP
? ? ?
? ? ?
Sector N + Sector N
Sum = GNP
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GNP by end use includes some components--notably changes in
inventories and strategic reserves--for which growth is
particularly difficult to estimate.10 With total GNP growth
determined on the sector-of-origin side, the growth of the
residual category of end use (outlays not elsewhere classified)
includes any changes in the statistical discrepancy between
sector-of-origin and end-use estimates.
In estimating growth by sector of origin, we seek to capture
trends in real value added. If the necessary data are available,
real value added should be calculated as a residual--that is, by
subtracting intermediate inputs in constant prices from gross
output in constant prices. Because information on the growth of
intermediate inputs is limited, however, such a calculation of
the growth of value added is feasible only for agriculture.
Growth estimates for the other sectors of origin are based on
proxies for value added:
o Gross output for industry, transportation, and trade.
o Labor inputs for many services--including education,
health, and all government services.
o Intermediate inputs for construction.
1 ?Inventory change is included in the investment category of
base-year GNP. Because we do not have enough data to estimate
inventory change every year, however, this item is part of the
residual category of end use in our estimates of GNP growth.
16
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Base-Year GNP in Established Prices
The first step in the derivation of base-year (1982)
estimates of Soviet GNP in established prices is the construction
of a set of four basic accounts showing the incomes and outlays
resulting from the economy's current production of goods and
services)1 Following a scheme initially developed by Abram
Bergson, incomes and outlays are estimated separately for
households and the public sector.12 In the USSR, the public
sector performs many functions that would be carried out
privately in market economies. It includes state enterprises,
collective farms, and other producer and consumer cooperatives,
as well as government and other institutions funded by the state
budget.
State enterprises, collective farms, and other producer
cooperatives perform functions similar to those of the business
sector in the United States. They operate as khozraschet
(economically accountable) units, producing goods and services.
Usually, they are expected to earn enough income from selling
their output to cover current operating costs and a portion of
investment costs. Institutions funded by the state budget
perform functions similar to those of the US government. In
contrast to khozraschet units, they receive all of their income
11See appendix B for tables of the basic accounts for 1982,
including their derivation.
12See his Soviet National Income and Product in 1937 (New York:
Columbia University Press, 1953), chapter 2; and, with Hans
Heymann, Jr., Soviet National Income and Product, 1940-48 (New
York: Columbia University Press, 1954), chapter 2.
17
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as grants and provide services at no charge, or at nominal
prices.
Basic Income and Outlay Accounts. To estimate the breakdown
of GNP by sector of origin, each type of income must be
distributed among the sectors in which it is earned (see figure
5). Incomes of households consist mainly of wages and salaries,
net income from agriculture, and earnings from privately provided
services. Public-sector incomes include social insurance
charges, profits, turnover and other indirect taxes, subsidies,
and depreciation.
Household and public-sector outlays--on consumer goods and
services, investment, and government services--form the basis for
the breakdown of GNP by end use. The difference between total
GNP and the identified items in these categories constitutes the
residual category of end use--outlays not elsewhere classified
(n.e.c.). These outlays include a portion of defense spending,
exports net of imports, unidentified outlays, and a statistical
discrepancy.
End-Use Residual. The CIA's estimates of total expenditures
on defense are independent of the GNP accounts; the sources of
data used in estimating GNP contain almost no information about
defense. The value of outlays n.e.c. in the end-use residual
includes part of defense spending but is too small to cover all
of it. We consider it likely that several other categories of
GNP by end use include military as well as civilian outlays on
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rigure
GNP BY SECTOR OF ORIGIN
Industry
Ferrous metals
Nonferrous metals
Fuel
Electric power
Machinery
Chemicals
Wood, pulp, & paper
Construction materials
Light industry
Food industry
Other industry
Construction
Agriculture
Transportation
Communications
Trade
Services
Housing
Utilities
Repair & personal care
Recreation
Education
Health
Science
Credit & insurance
Govt admin & misc arvcs
Genl agric progs
Forest economy
State admin & sec ores
Municipl & relatd srvcs
Military personnel
Other branches
Gross national product
GNP BY TYPE OF INCOME
Wage bill
State wages & salaries
Military pay & allwncs
Social insurance
Other labor income
Net incm of hshlds--agric
Military subsistence
Private money income
Imputed net rent
Imputed owner construe
Entrprs chrgs--soc-cult
Profits
State enterprises
Collective farms
Consumer coops
Other organizations
Indirect taxes
Turnover tax
Miscellaneous charges
Subsidies
Other nonlabor income
Unident income & discrep
Entrprs chrgs--spc1 funds
Depreciation
Gross national product
Components of Base-Year Soviet GNP in Established Prices
.HOUSEHOLD INCOMES
State wages & salaries
Net income from agric
Money wages--coll farms
Net income from sales
Net income in kind
Income of armed forces
Military pay & allwhcs
Military subsistence
Othr money income & discrep
Private money income
Unident income & discrep
Imputed net rent
Imputed owner construction
Total current income
Transfer receipts
Total income
PUBLIC SECTOR INCOMES
Net income retained by orgs
By state enterprises
By collective farms
By consumer coops
'By other organizations
Taxes & oth pymts to budget
Deductions from profits
Tax on collective farms
Tax on consumer coops
Tax on other orgs
Turnover tax
Miscellaneous charges
Allowncs for subsid losses
Charges for special funds
Soc insurnc & soc secur
Social-cultural & sports
Education
Militarised guards
Support for admin--higher
Depreciation
Consol total purr charges
Transfer receipts
Consolidated net income
HOUSEHOLD OUTLAYS
Retail sales for consump
' State, coop, Si commies
Collective farm
Consumption in kind
. Farm consumption
, Military subsistence
,Consumer services
Housing
Other services
Investment
Private housing construc
i Farm investment in kind
'Total outlays--cons & invst
Transfer outlays
!Total outlays
:
;PUBLIC SECTOR OUTLAYS
Communal services
Education
Health
Physical culture
Gross investment
Fixed capital
? New fixed investment
Capital repair..
Inventories
Govt admin & miso services
Gonl aerie progs
Forest economy
State &chain Si soc org ads
Municipal Si related srvcs
h Si development
Outlays nec
Net exports
Defense neo, etc Si discrp
Consolid total goods Si srvs
Transfer outlays
Consolidated total outlays
.- a.. .?
GNP BY END USE
Consumption
Goods
Food
Soft goods
Durables
Services
Housing
Utilities
Transportation
Communications
Repair Si personal care
Recreation ,
Education
Health
Investment
New fixed investment
Machinery Si equipment
Construction Si other
Net adds to livestock
Capital repair
"Inventories
Other public sector expends
Govt admin Si sisc srvcs
Gent agric progs
Forest *comm.
Stat. admin Si soc ergs
Municipl Si relatd Bryce
Research Si development
Outlays nec
Net exports
Defense nec, etc, diger
Gross national product
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goods and services. These categories are investment--including
new construction, new machinery, and capital repair--research and
development/ and miscellaneous consumer and government
services.13
Also in the end-use residual, exports and imports are valued
at what the Soviets call foreign trade prices--prices prevailing
on world markets, converted to rubles at official exchange rates.
Except for the arbitrary nature of Soviet exchange rates, this
valuation of trade matches that recommended by the United Nations
for its System of National Accounts. Strictly speaking, our
estimates of "GNP" actually reflect gross domestic product (GDP)
because payments for labor and capital services exchanged with
other countries are not included in exports and imports.
Payments of this kind are thus far of little consequence,
however, so differences between GNP and GDP are probably sma11.14
Determination of Total GNP. The total value of GNP in the
base year is derived by consolidating the four basic income and
outlay accounts. In principle, because total incomes must equal
total outlays by definition, this consolidation could be done by
13For further discussion of the relationship between the CIA's
estimates of defense spending and GNP, see CIA Research Paper,
Soviet Gross National Product in Current Prices, 1960-80 (SOV 83-
10037, March 1983), pp. 3, 13, 24.
14We are studying the feasibility of developing estimates of GNP
proper. To estimate GNP, payments to Soviet nationals (and the
government) of wages and salaries earned abroad and returns on
capital invested abroad would have to be added to GDP.
Similarly, payments to foreign nationals of wages, salaries, and
returns on capital earned inside the USSR's borders would have to
be subtracted.
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adding either incomes or outlays of households and the public
sector, except for transfers.15
In practice, our estimates of household outlays and public-
sector incomes--which are judged more reliable than estimates of
household incomes and public-sector outlays--provide the control
total for GNP overall. The coverage of household outlays appears
reasonably complete, while the coverage of household incomes is
known to be incomplete. Estimates of public-sector incomes are
subject to some uncertainty, especially in the case of
miscellaneous budget revenues. But the difficulties of
estimating public-sector outlays--without knowing how much of
total defense spending (estimated independently of GNP) is
concealed in investment and other civilian categories and how
much is included in outlays n.e.c.--are even greater.
Imputations. Like GNP accounts for the United States, our
estimates of Soviet GNP include imputed values for several kinds
of output that are not exchanged through the usual buyer-seller
channels and would not otherwise be assigned monetary values.
The principal imputations cover:
15Transfers, such as pensions, are reallocations of income
between households and the public sector. They are excluded from
GNP because they do not reflect current production of final goods
and services. (Current provision for future pensions is included
in GNP, however, in the form of social insurance payments by
employers.)
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o Agricultural production consumed and invested in kind--
farm consumption of home-produced food and changes in
private livestock inventories--valued at average selling
prices.
o Subsistence rations of food and clothing given to members
of the armed forces and valued at state retail prices.
o The rental value of owner-occupied housing, with the
average rent on state housing applied to private housing.
o Construction of private housing by owners, with owners'
labor implicitly valued at the same wage rate as labor
hired for such construction.
Sources of Data. In general, our methods of estimating 1982
GNP in established prices are the same as those used for 1970 GNP
in established prices.16 ?The availability
evidence for the 1982 estimates are fairly
somewhat short of the 1970 standard. Data
are obtained directly from official Soviet
publications, and estimates based on these
and quality of the
good, in our view,
but
on many GNP components
statistical
data continue to be
reliable. For other components, however--especially budgetary
incomes and outlays on privately provided services--estimates
must be pieced together from Soviet monographs and journal
articles, which do not always give information for the desired
year and definition and often are inconsistent.
16For details of the estimation of 1970 GNP in established
prices, see USSR: Measures, pp. 125-161; and CIA Research Aid,
USSR: Gross National Product Accounts. 1970 (A(ER) 75-76,
November 1975).
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Contribution of Second Economy. The "second economy" in the
USSR includes a variety of private and illegal or questionably
legal activities, some of which contribute to GNP while others do
not. The full scope of the USSR's second economy, according to
Gregory Grossman's definition, is broad:
As some scholars define it, the second economy comprises
all production and exchange activity that fulfills at
least one of the two following tests: (a) being directly
for private gain; (b) being in some signif4cant respect
in knowing contravention of existing law.i/
To facilitate international comparisons, Soviet GNP should
include the full range of economic activities measured in GNP
statistics for Western countries. This standard calls for the
inclusion of all legal private production and also of activities
that are illegal or tightly restricted in the USSR but not in the
West. Activities that would be considered crimes in any country
should be excluded, following Western practice. It is often
difficult, however, to draw the line between activities that are
illegal because of the USSR's political and economic system and
activities that would be illegal in the West, where laws differ
among countries. 18
17"The 'Second Economy' in the USSR," Problems of Communism
(September-October 1977): P. 25.
18For discussions of the treatment of illegal activities in US
GNP, see Carol S. Carson, "The Underground Economy: An
Introduction," Survey of Current Business (May 1984): pp. 22-24,
continued in Survey of Current Business (July 1984): pp. 106-
109; Edward F. Denison, "Is U.S. Growth Understated Because of
the Underground Economy? Employment Ratios Suggest Not," Review
of Income and Wealth (March 1982): pp. 2-4; and George Jaszi,
"The Conceptual Basis of the Accounts: A Reexamination," in
Conference on Research in Income and Wealth, A Critique of the
United States Income and Product Accounts, Studies in Income and
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Our base-year estimates of Soviet GNP in 1982 cover most of
the second economy's activities that, as best we can determine,
should be included, but problems of acquiring the necessary data
prevent full coverage.19 These estimates include all of the
legal private production we can identify in agriculture and
housing. Some undercounting of this production is possible,
however, if there are gaps in the official Soviet data on which
the estimates are based. In addition, GNP includes a wide
variety of privately provided services that are legal in the
West, without distinction as to which are classified as legal or
illegal by the Soviet authorities. The coverage of repair and
personal care services--estimated from information in Soviet
monographs and press and journal articles--is uncertain but
probably somewhat low. Estimates of privately provided health
and education services are based on sparse information and may be
understated.
In our judgment, GNP should include any increases in output
available to final purchasers as a result of the diversion of
state resources--such as the construction of private housing
using materials stolen from state enterprises.20 Some private
Wealth, Vol. 22 (Princeton: Princeton University Press, 1958),
p. 143.
19For a detailed discussion of the extent to which the second
economy is covered in earlier CIA estimates of Soviet GNP, see
Gertrude E. Schroeder and Rush V. Greenslade, "On the Measurement
of the Second Economy in the USSR," ACES Bulletin (Spring 1979):
pp. 3-21.
20Activities that do not add to legal production of goods and
services for final use should be excluded, however. For example,
theft of goods from state retail inventories for consumption by
the thief represents a transfer rather than an addition to GNP.
(If inventories are measured after such theft has occurred,
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activities involving such diversion are reflected in our
estimates of GNP, but others are not. Private housing built with
stolen materials is included to whatever (unknown) extent it is
captured in official Soviet investment statistics. On the other
hand, most illegal production of consumer goods probably is
missed in our estimates. Such production is counted if it is
sold through state retail outlets, but most of it probably is
sold privately.
Comparison With US Methods. Although we strive to match US
practice as closely as possible in constructing base-year
estimates of Soviet GNP, some differences cannot be avoided. The
basic framework of our breakdowns by type of income and by end
use is similar to that used in the US national income and product
accounts (see figure 6).21 Definitions of many individual
components differ, however, largely because of the major
differences between economic systems and institutions in the two
countries.22
however, both inventories and GNP will be understated unless the
value of the theft is estimated and added back.)
21Estimates of GNP by sector of origin are also available for the
United States, and in much greater detail than for the USSR.
These estimates, however, do not play a key role in determining
the real growth of total US GNP, which reflects a weighted
average of the growth of components by end use, rather than by
sector of origin.
22For more information on how the major categories of US and
Soviet GNP compare, see CIA Research Paper, USSR: Toward a
Reconciliation of Marxist and Western Measures of National Income
(ER 78-10505, October 1978). Comparisons of these categories are
also discussed in USSR: Measures, pp. 30-32; and in CIA, USSR:
Gross National Product Accounts. 1970, pp. 13-14.
24
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Figure 6
Major Components of US and Soviet GNP
GNP by Type of Income
US Soviet
Compensation of employees Wage bill
Social insurance
Other labor income
Proprietors' income
Rental income of persons
Corporate profits
Net interest
Indirect business taxes
Subsidies
Capital consumption allowances
(depreciation)
Profits
Other nonlabor income
Indirect taxes
Subsidies
Depreciation
GNP by
US
Personal consumption expenditures
Durable goods
Nondurable goods
Services
Gross private domestic investment
Fixed investment
Nonresidential
Structures
Producers' durable equipment
Residential
Change in business inventories
Government purchases
Federal
National defense
Nondefense
State and local
Net exports
Exports
Imports
End Use
Soviet
Consumption
Food
Soft goods
Durables
Services
Investment
New fixq0 investment
Machinery and equipment
Construction and other
Net additions to livestock
Capital repair
Other public expenditures
Government administrative
services
Research and development
Outlay. NEC
Net exports
Defense NEC
Inventories
CD
0
CD
CD
a
-0
51)
(I)
51)
CD
C)
0
73
73
CD
Ei
7J
CD
(1:7
51)
CD
N)
0
. .
0
7Z1
0
-0
CO
0
0
0)
0
0
0
0.)
0
0
0
0
0
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Most of the components of Soviet GNP by type of income
reflect institutional arrangements that differ considerably from
those in the United States. Wages and social insurance, which
are essentially similar in both countries, are the exception.
Several other components of Soviet GNP by type of income--
profits, indirect taxes, subsidies, and depreciation--are roughly
similar in concept to the corresponding US categories. The
fiscal and financial systems on which the relative sizes of these
components depend, however, are very different in the two
countries.
For still other types of income, institutional differences
have even greater effects. Because of restrictions on private
ownership in the USSR, Soviet GNP includes only a fraction of the
earnings in the US categories for proprietors' income and rental
income of persons. Moreover, interest is not included in Soviet
GNP in established prices, except to the extent that payments
into the state budget for the use of capital are reflected in
budgetary income.
Several components of Soviet GNP by end use also differ in
coverage from the corresponding categories of US GNP. Because
nearly all health and education are provided by the government in
the USSR, we group these services with consumption in Soviet GNP.
The publicly provided portion of these services would be counted
as government spending in the United States.23 The government
23In GNP accounts for both the USSR and the United States,
government services are valued at the cost of the labor and
materials used to provide them. Private consumer services are
more widely available in the United States, however, at prices
that include profits as well as costs. The share of state-
25
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also administers a large share of investment in the USSR, and the
investment category of Soviet GNP includes government
expenditures on social infrastructure such as housing, utilities,
highways, airports, schools, and health facilities. In US GNP,
the investment category includes only private spending;
government purchases of capital goods as well as less durable
items are considered part of government spending.
Our estimates of the capital repair component of Soviet GNP
include some expenditures that would be considered intermediate
rather than final uses of output--and therefore would be excluded
from GNP--in the United States. From Soviet data on capital
repair, it is nearly impossible to establish a boundary between
routine maintenance of the capital stock, which should be counted
as a cost of current operations, and major repairs, which are
included correctly in investment used to replace aging plant and
equipment. Similarly, Soviet outlays on research and development
include some activities that would be charged to current
operating expenses in the United States. Government-funded
research and development is considered final output in both
countries, but privately financed activities, like other business
expenses, are excluded from US GNP.
Factor Cost Adjustment of Base-Year GNP
Prices are set administratively in the USSR and often are
used more to further various government policies--sometimes with
conflicting objectives--than to promote efficiency in production
provided consumer services in Soviet GNP would rise if some of
these services were valued at prices higher than costs.
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and exchange. Retail prices of consumer "luxuries" like alcohol
and automobiles, for example, include large turnover taxes that
are a major source of revenue for the state. On the other hand,
retail prices of "necessary" consumer goods and services, such as
staple foods and housing, have not been raised officially for
decades. Because production costs have risen, large subsidies--
about 15 percent of the state budget--are now required to
maintain such low prices. Wholesale prices of energy and many
basic industrial materials, moreover, have been kept low by
restricting profit margins, in order to hold down costs for
sectors using these products as inputs.
Valuation of GNP. Ideally, GNP should be valued in prices
that reflect the preferences of final consumers--or perhaps of
central planners in the USSR--and that encourage the efficient
use of inputs in production.24 Actual prices in all countries
fall short of these theoretical standards for measuring resource
allocation and economic growth. In the West, the usual
convention is to accept market prices as close enough to the
standards for purposes of estimating GNP. Sometimes GNP is also
valued at factor cost--that is, at market prices excluding
indirect taxes and subsidies.
In examining Soviet pricing practices, Abram Bergson
considered these exclusions insufficient, by themselves, because
established prices did not adequately reflect the cost of
24For a list of Western articles on the theory of valuing
national income, see USSR: Measures, p. 34.
27
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capital. He therefore devised the adjusted factor cost standard
to provide an improved basis for measuring the Soviet economy's
potential to produce goods and services.25 The basic premise of
his approach is that output prices reflecting the costs of
economic resources can be calculated if inputs of the primary
factors of production--labor, capital, and land--are valued in
proportion to their average productivities. Bergson has
demonstrated that these adjusted factor costs (hereafter, simply
factor costs) provide appropriate weights for estimating changes
in production potential despite inefficiencies that keep output
from reaching its maximum level. Strictly speaking, however, the
preferences of final users are not reflected in factor cost
values.26
Still, there are problems with the Soviet price system--
especially its rules for pricing new products--that the factor
cost adjustment does not address. Wholesale prices of machinery
and other goods with frequently changing specifications often
include exaggerated price increments for minor improvements in
25See his Soviet National Income and Product in 1937, chapters 3
and 4; The Real National Income of Soviet Russia Since 1928
(Cambridge, Mass.: Harvard University Press, 1961), chapters 3,
8, and 9; and, with Hans Heymann, Jr., Soviet National Income and
Product, 1940-48, chapter 3.
26The typical interpretation of Western measures of economic
growth--weighted by market prices--is that they reflect changes
in consumer welfare. This interpretation cannot be applied to
estimates of Soviet GNP at factor cost because the adjustment
procedure does not attempt to take consumers' or planners'
preferences into account. (See Bergson, The Real National Income
of Soviet Russia, pp. 36-39, 115-117.) Bergson has examined
trends in welfare by estimating consumption in what he calls
adjusted market prices, but he has not extended those
calculations to other end uses of GNP. (See The Real National
Income of Soviet Russia, chapter 10.)
28
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quality. This may well contribute to an overstatement of the
prices of machinery relative to those of other products.27 In
the words of a prominent Soviet advocate of economic reform,
"Prices for machines, industrial equipment, and the entire range
of manufactured consumer goods are too high."28
In addition, the factor cost adjustment does not necessarily
result in market-clearing prices. Neither does it indicate
appropriate valuations for the activities of the second economy
that are encouraged by chronic imbalances between supply and
demand.28 For example, the artificially low prices of many
consumer goods in state retail stores often lead to the resale of
such goods on black markets at sharply higher prices.
Adjustment of GNP by Sector of Origin. Our current
procedures for adjusting 1982 Soviet GNP to factor cost differ in
some of the specifics from those used previously to adjust 1970
GNP, but the basic approach has not changed." As before, the
adjustment begins with an evaluation of how well the elements of
27The pricing of new products also leads to disguised inflation
in some of the official Soviet data used in our estimates of
growth, particulary for machinery output (on the sector-of-origin
side of GNP) and machinery investment (on the end-use side).
This inflation is discussed below, in the section, "Reliability
of Estimates of Growth."
28Interview with Nikolay Shmelev by Viktor Loshak, Moscow News
(No. 50, 1988): p. 10.
29For a discussion of this point, see Vladimir G. Treml, "Notes
on Estimation of Second Economy Activities and National Income
Accounts" (manuscript, 1986), pp. 22-23.
30See appendix C for detailed tables of the results of the factor
cost adjustment.
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value added in established prices reflect the contributions of
the primary factors of production to GNP by sector of origin.
According to Bergson's adjusted factor cost standard, wage
differences among sectors should reflect occupational differences
in labor productivity and the job preferences of workers. The
mobility of labor and the flexibility of wage rates in the USSR
appear sufficient for wages in established prices to meet this
requirement reasonably well, except in the case of military
pay.31
Bergson has also recommended that charges for capital should
consist of an allowance for depreciation, plus interest
calculated at a rate representing the average productivity of
capital in the economy. Depreciation payments in established
prices are accepted without adjustment for our GNP estimates at
factor cost, largely because, as noted earlier, so little
information about wear and tear on capital is available.32
As also mentioned above, however, reported profits and the
rest of value added in established prices do not provide a good
31We adjust military pay to factor cost by revaluing conscripts'
incomes to reflect wages paid to civilian workers with roughly
similar skills. That is, we replace the monetary pay and
subsistence allowances of food and clothing actually received by
conscripts with wages at an assumed rate slightly higher than the
minimum wage for industrial workers. Incomes of military
officers and other nonconscript personnel are not adjusted
because their pay seems higher, if anything, than that of
civilians for work of comparable responsibility and difficulty.
32The exception to this statement is that we impute depreciation
on the stock of fixed capital in four service sectors: housing,
education, health, and science. This imputation is made because
many of these services are provided by institutions that are
financed by the state budget and thus do not make depreciation
payments.
30
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measure of returns on capital. When prices are planned, profit
rates are set arbitrarily for enterprises operating on a profit-
or-loss basis. For institutions financed by the state budget,
which are common in the service sectors, there is no provision at
all for profits. These pricing policies contribute to wide
variations among sectors in the relationship of reported profits
to stocks of capital. Turnover and other indirect taxes and
subsidies further widen the gap between established prices and
resource costs. Moreover, the differentiated rates of many such
taxes and subsidies are a major source of divergence from another
requirement of the adjusted factor cost standard--that the price
of a product should be the same for all purchasers.
Our factor cost adjustment subtracts reported profits,
indirect taxes, and subsidies (initially entered with a minus
sign, so added as a result of the adjustment) from the value
added of each sector of origin in established prices. Returns on
capital--calculated at a uniform rate on each sector's capital
stock--are added back.33 In these calculations:
33No returns are imputed on the capital stock of the government
administrative service sectors (general agricultural programs,
forestry, state administration and social organizations, culture,
municipal services, and civilian police). This exclusion
improves the comparability of our estimates with GNP statistics
for Western countries, which do not allow for returns on capital
owned by the government.
Furthermore, returns on capital are calculated at half of
the usual rate for the housing, education, health, and science
sectors. In the United States and other Western countries,
returns on housing often are lower than returns on business
capital, partly because of government policies encouraging
individual ownership of homes. Also, many education, health, and
science services are provided by the government, with no
allowance for returns on government capital.
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o The rate of return is assumed to be 12 percent of fixed
and working capital--including unfinished construction--
the minimum rate set by Soviet planners for deciding that
an investment project should be funded.34
o Stocks of fixed capital are valued net of depreciation
because some sectors have older stocks than other
sectors. The assumption of a uniform rate of return
would not be strictly valid if age-related differences in
wear and tear were not taken into account.35
These procedures for estimating returns on capital differ
from those used in our factor cost adjustment of 1970 GNP.36
There, the total value of returns on capital was assumed equal to
the sum of the incomes removed from GNP in established prices.
This assumption was dropped because it made the average rate of
return in the economy depend on Soviet financial policies that
34An investment project that is approved for funding--for
example, a new factory--must generate enough savings in future
operating costs to pay back the outlays required to set it up.
For most industries, the profits that eventually result from such
cost savings are expected to cover state charges for the use of
capital, interest on bank loans, maintenance of enterprise funds
for small investments, and miscellaneous payments into the state
budget. See Gosplan SSSR, Metodicheskiye ukazaniya k razrabotke
gosudarstvennykh planov ekonomicheskogo i sotsial'nogo razvitiya
SSSR (Methodological Instructions for Working Out State Plans for
the Economic and Social Development of the USSR) (Moscow:
Ekonomika, 1980), p. 441.
35In principle, capital stocks also should be revalued to reflect
the effects of the factor cost adjustment on the prices of plant
and equipment. We have not attempted such a revaluation because
of a lack of information about the effects of price changes on
capital stock values. A calculation of this kind was carried
out, however, by Richard Moorsteen and Raymond P. Powell in The
Soviet Capital Stock, 1928-1962 (Homewood, Ill.: Richard D.
Irwin, 1966), pp. 256-257.
36See USSR: Measures, pp. 38-41, 163-168.
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are subject to change, such as decisions about the role of
turnover taxes and subsidies in the state budget. Also, returns
on capital in our previous estimates were distributed by sector
of origin in proportion to gross sectoral capital stocks--before
deduction of accumulated depreciation--thus ignoring the effects
on returns of the proportion of service life exhausted. The
assumed value of the gross return on capital in 1970 was equal to
18 percent of the gross stock, or 24 percent of the stock net of
depreciation.
According to Bergson, returns on superior land and other
natural resources also should be included in GNP at factor cost.
Although we have not yet developed such estimates, we are
examining possible methods of doing so. Meanwhile, the omission
of returns on land reduces the shares of the agricultural,
housing, fuel, and metallurgical sectors in GNP.
Adjustment of GNP by End Use. A two-step procedure is used
to transfer the factor cost adjustment from the sector-of-origin
side of GNP to the end-use side (see figure 7). First, some of
the indirect taxes and subsidies removed from value added in
established prices fall directly on specific end uses of the
products in question. These taxes (or subsidies) are subtracted
directly from (or added to) the affected end uses.
Second, the indirect effects of substituting factor costs
for established prices in estimates of GNP by sector of origin
are calculated. For each sector, the change in the resource cost
of capital implies a change in the price of output--and, at the
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Sector
I n.iii,try
Cul itrual. ion
Fig 11,1.11 LUrc
1 e.pur tat ion
t.ueieteiii_at ions
IerviCe
r sale
Military personnel
Other braiwhes
Mit RMITI PIJRCIIASES
- - - - - - - -
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Figure 7
Factor Cost Adjustment of Base-Year Soviet GNP
STEP 1: DIRECT ODJUSIMENT
Indu,try Con,truc Agricul
Lion tura
Other INTERME0
Branches SALES
FL?yes
insurance REMOVE FROM VALUE ADDED
Other labor income OF EACH SECTUR: ADO BACK TO VALUE MOOED
Depreciation Profits OF EACH SECTOR:
Indirect taxes %Awns on capital
Indire,t LaXileS Subsidies
Subsidies Uthr nonlabor ince
O1hr norilabor ince
VALUE FlUbE0 REVISED REVISED REVISED REVISED REVISED REVISED REVISED
?
? rommir
4
Se.. I.
:
u I.
Ayricultnre
Irariporlation
Loreautations
Ii ante
Services
Military personnel
01.1sq b1 Oil.
INITRAEUpusou*riEs
Hayes
S?wial insurance
Other labor incase
Dept rr s on
itet I or 11%or, cdpI t
V111.1.11. OUDEO
? ? -
1.401r0i UIJIIIJI
. _
STEP 2: INDIRECT ADJUSIMENT
Industry Construc Arricul Other INTERMEO
Lion tore Branches SALES
REIVICF SRI ES OF FOCH '4 CDR:
INPUI-OUIPDT EDDIE
Revised value added 'spites
revised price and gross output
PLVP411 ktVISFO REVISED RUVP-E0 REVISED REVISED RftWit0
Consump Invest Defense Other Net FAO GROSS
tion ment. Govt. Exports USE OUTPUT
a =========
REMOVE FROM SALES OF EACH SECTOR:
Indirect taxes (specific)
Subsidies (specific)
Consump Invest Defense Other Net END GROSS
tion sent Govt Exports USE OUTPUT
==a-- ...... ----------=====m========================a 7.11=N2694.311
REVISED
REVISED
REPRICE SOLES OF EACH SECTOR: REVISED
--VIA INPUT-OUTPUT TABLE REVISED
Revised value added implies REVISED
revised gross output ponsw
REVISED
REVISED
REVISED
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same time, the change in value added implies a change in the
value of gross output. The implied change in price--or gross
output--is calculated with the aid of an estimated 1982 input-
output table, which shows sector-by-sector linkages from value
added to gross output and then to end use. Then this price
change--in the form of a ratio for the appropriate sector--is
multiplied by estimates of the end uses of the sector's output.
(The latter estimates, as already noted, are valued in
established prices after adjustment for the direct effects of
taxes and subsidies.)
Sources of Data. The factor cost adjustment requires two
basic kinds of estimates besides those made for GNP in
established prices: capital-stock classified by sector of origin
and an input-output table. Estimates of capital stock are taken
largely from official Soviet statistical yearbooks. Values of
fixed capital including depreciation--in prices said to be
constant at 1973 levels--can be derived readily for most sectors.
Fixed capital net of depreciation is calculated from data on the
share of wear and tear in the value of gross capital stock.
Values of working capital and unfinished construction--in current
prices--are also given in official yearbooks. This information
is less detailed than data on fixed capital, however; as a
result, assumptions have to be made about the distribution of
these values by sector. Still, our estimates of 1982 capital
stock by sector of origin are about as reliable as estimates for
1970.
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The input-output table used in the factor cost adjustment of
1982 GNP by end use is considerably less detailed than the table
used for 1970.37 Both tables are based on estimates made by the
Center for International Research of the US Bureau of the Census,
but the Soviet sources from which the new table is derived give
much less information than was available about its predecessor.38
Results of Adjustment. The factor cost adjustment leads to
some marked changes in the structure of GNP by sector of origin
and by end use. On the sector-of-origin side, industry's share
of total GNP is much lower at factor cost than in established
prices, largely because almost all of the indirect taxes removed
by the adjustment apply to industrial products (see table 5).
The share of services, in contrast, is considerably higher,
primarily because many services are heavily subsidized.
Agriculture also has a larger share of GNP at factor cost,
37For example, the input-output table used for the 1970 factor
cost adjustment was extended from the basic 1972 table to include
estimates of intermediate sales and purchases of services. Such
estimates have not been made for 1982 because the necessary
information is lacking. Our factor cost adjustment of end uses
of services in 1982 GNP, therefore, is not based on the
calculations of price changes described in the text above.
Instead, the estimate of end use of each service in established
prices is adjusted by simply adding or subtracting the ruble
difference between value added at factor cost and value added in
established prices for the same service as a sector of origin.
38The table used to estimate 1970 GNP at factor cost is derived
as described in USSR: Measures (pp. 38-40, 163-168) from the
1972 table published in Dimitri M. Gallik, Barry L. Kostinsky,
and Vladimir G. Trend, Input-Output Structure of the Soviet
Economy: 1972, Foreign Economic Report No. 18 (US Department of
Commerce, Bureau of the Census, April 1983). For the 1982 input-
output table, see Jeanine Braithwaite, "The 1982 Seventeen Sector
Input-Output Table for the Soviet Union" (Center for
International Research, Soviet Branch Research Note, June 1987).
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Table 5
USSR: Distribution of GNP in 1982 by Sector of Origin
in Established Prices and at Factor Cost
Total GNP
Industry
Ferrous metals
Nonferrous metals
Fuel
Electric power
Established
Prices
100.0
50.6
1.9
1.4
9.9
1.8
Factor
Cost
100.0
32.4
1.9
1.3
3.1
2.3
Machinery
11.5
11.4
Chemicals
2.2
2.4
Wood, pulp, & paper
2.2
1.9
Construction materials
1.9
1.9
Light industry
8.2
2.2
Food industry
7.7
2.6
Other industry
1.9
1.3
Construction
6.7
7.8
Agriculture
15.3
20.6
Transportation
8.4
9.5
Communications
0.8
0.9
Trade
4.6
6.5
Services
11.6
20.1
Housing
0.8
5.5
Utilities
0.6
1.3
Repair & personal care
1.6
1.6
Recreation
0.5
1.0
Education
2.6
3.9
Health
1.4
2.1
Science
1.8
2.2
Credit & insurance
0.4
0.3
Govt administration
2.1
2.2
Genl agric programs
0.3
0.3
Forestry
0.1
0.1
State admin
0.8
0.8
Culture
0.3
0.3
Municipal services
0.2
0.2
Civilian police
0.4
0.5
Military personnel
1.4
1.9
Other branches
0.4
0.3
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reflecting its greater use of capital than accounted for by
reported profits. In like manner, the cost of capital
contributes to higher shares of construction, transportation, and
trade in GNP at factor cost, although not as much higher as in
agriculture. The increases in the shares of agriculture and
construction suggest that the factor cost adjustment includes a
correction for depressed profit levels prior to the revisions of
established prices that occurred after 1982.
These changes in GNP by sector of origin carry over to the
allocation of GNP by end use (see table 6). Total consumption
takes a slightly higher share of GNP at factor cost than in
established prices, while the shares of some of the components of
consumption are quite different. The adjustment has little
effect on the share of food consumption because the indirect
taxes subtracted from consumption of alcoholic beverages and
processed foods roughly balance the subsidies added to
consumption of animal (meat and dairy) products and basic foods.
Similarly, the indirect taxes subtracted from consumption of soft
goods and durables nearly offset the subsidies added to
consumption of housing and other services. The factor cost
adjustment raises investment's share of GNP because it raises the
prices of construction and machinery--the major components of
investment--relative to prices of other output. The share of
defense, too, is slightly higher at factor cost.
The factor cost adjustment also reduces the total value of
base-year (1982) GNP by about 10 percent. On balance, the sum of
the indirect taxes, subsidies, and profits removed from GNP in
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Table 6
USSR: Distribution of GNP in 1982 by End Use
in Established Prices and at Factor Cost
Total GNP
Consumption
Consumer goods
Food
Animal products
Processed foods
Basic foods
Beverages
Soft goods
Durables
Consumer services
Housing
Utilities
Transportation
Communications
Repair & persnl care
Recreation
Education
Health
Investment
New fixed investment
Machinery & equipment
Construction & other
Net adds to livestock
Capital repair
Other government outlays
Govt admin services
Research, development,
outlays n.e.c.
Established
Prices
Factor
Cost
100.0
100.0
53.4
55.3
41.8
35.2
24.9
25.0
9.1
13.6
2.8
2.1
4.7
5.8
8.3
3.5
11.2
6.4
5.7
3.8
11.6
20.0
0.9
5.6
0.9
1.7
1.5
1.6
0.4
0.4
1.9
2.0
0.6
1.1
3.4
4.8
2.0
2.8
28.1
30.4
21.9
23.8
8.6
9.1
13.1
14.4
0.2
0.3
6.1
6.6
18.6
14.3
2.7
2.9
15.9
11.4
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established prices exceeds the value of the returns on capital
added back to GNP at factor cost. Almost all of the difference
results from an implicit change to domestic prices in the
valuation of foreign trade. As noted above, GNP in established
prices includes exports and imports valued in foreign trade
prices. Any differences between domestic and foreign trade
prices are included in the indirect taxes--similar to turnover
taxes on domestic output--removed by the factor cost adjustment:
o Some major exports--mostly of energy--are sold at foreign
trade prices that are considerably higher than domestic
costs plus profits. The surplus--which is collected by
the state foreign trade authority and paid into the
budget--is subtracted in the process of adjustment.
o Selected imports--primarily of soft goods and durables
for consumption--are sold to domestic users at prices
that include substantial duties. Our procedure for the
factor cost adjustment subtracts import duties from
consumption and from total GNP.
Finally, the factor cost adjustment affects our estimates of
the growth of total GNP. For most of the period since 1950,
rates of GNP growth at factor cost have been lower than rates in
established prices (see table 7). The gap between these rates
has narrowed gradually over time, however, and reversed direction
in the 1980s. In large part, trends in this gap reflect
differences in the contributions of industry and agriculture to
overall growth. Industry, which has a smaller weight in GNP at
factor cost than in established prices, traditionally has grown
37
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Table 7
USSR: Effects of Factor Cost Adjustment
on GNP Growth, 1951-87
Average Annual Rates
GNP
Estab- Factor
lished Cost
Prices
Industry
Estab- Factor
lished Cost
Prices
Services
Estab- Factor
lished Cost
Prices
1951-55
5.9
4.8
9.8
9.7
1.5
2.4
1956-60
6.0
5.5
7.4
7.5
3.6
4.1
1961-65
5.0
4.8
6.0
6.5
4.4
4.5
1966-70
5.2
4.9
5.9
6.0
4.7
4.2
1971-75
3.5
3.1
5.0
5.6
3.7
3.4
1976-80
2.2
2.1
2.3
2.4
2.9
2.6
1981-85
1.8
1.9
1.8
2.0
2.1
2.2
1986-87
2.5
2.7
2.3
2.9
2.7
2.7
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more rapidly than the rest of the economy, while agriculture,
which has a larger weight, has grown more slowly. More recently,
the growth of services, which have a larger weight at factor
cost, has become faster than growth in industry and agriculture.
Besides total GNP growth, estimates of the growth of
industry and services are affected by the factor cost adjustment
because value-added weights are broken down by branch within
these major sectors. (The growth of agriculture is not affected
because only a single value-added weight is estimated for the
sector.) For industry, growth at factor cost has consistently
exceeded growth in established prices. Part of the explanation
is that the machinery branch, which has a greater weight at
factor cost, grew faster than the rest of industry during the
1960s and 1970s. In the case of services, differences between
growth rates at factor cost and in established prices have varied
with differences between the growth of housing and growth in the
rest of the sector.
Growth of GNP
To estimate the growth of total GNP, as explained earlier,
we need a base-year weight and an index of growth for each
component. The indexes of component growth, in turn, are derived
from additional, more detailed base-year weights and from data on
changes in the output of samples of products. These indexes are
estimated for components of GNP both by sector of origin and by
end use, but it is the sector-of-origin indexes that determine
total GNP growth.
38
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Detailed Weights for Growth Estimates. The weights we use
to calculate the growth of Soviet GNP are estimated at three
levels of detail (see figure 8). At the first, most aggregated
level, the weights come from our base-year estimates of the
components of GNP by sector of origin and end use.39 The most
detailed, third-level weights are the prices of the individual
products in the samples used to track growth of the components of
GNP. Between these levels are intermediate weights, which link
the growth of two major kinds of components of GNP with the
growth of samples of individual products. These weights consist
of estimates of:
o Value added by subbranch within the main branches of
industry--for example, automobiles and precision
instruments within the machinery branch--for GNP by
sector of origin.
o Final expenditures by subcategory within consumption of
food and soft goods--for example, clothing and shoes
within soft goods consumption--for GNP by end use.
Our detailed weights for estimating the growth of GNP
components are based on several kinds of sources, which vary in
reliability. Information on the 1982 prices of individual
39Estimates valued at factor cost provide the aggregated weights
preferred for most analytical purposes, but estimates based on
established prices also are used as weights for some calculations
of growth. Weights at the second and third levels are available
only in established prices because it is not feasible to
calculate the factor cost adjustment in the additional detail
that would be required. For the industrial sector, however,
these detailed weights exclude indirect taxes and subsidies.
39
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Figure 8
Levels of Weights for Estimates of GNP Growth
1) GNP accounts at factor cost and in established prices
Value added by sector of origin
Final expenditure by category of end use
2) Linking weights (for some major components of GNP)
Value added by sub-branch of industry
(based on input-output table in producers' prices)
Final expenditure by sub-category of consumption
(based on retail sales, adjusted for institutional
purchases and consumption in kind)
3) Prices of products in samples
(for components by sector of origin and by end use)
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products in our samples--the third-level weights--is adequate for
the most part. It is sparse for chemicals and processed foods,
however, and not as good generally as information on 1970 prices.
The vast majority of 1982 prices are drawn from Soviet monographs
and journal articles; official handbooks listing prices are not
available.
For the second-level weights, estimates of 1982 value added
by subbranch of industry are passable, but they are based on an
input-output table considerably less detailed than its
predecessor. On the other hand, 1982 expenditures by subcategory
of consumption are estimated largely from data published in
Soviet statistical yearbooks. We consider the quality of these
estimates good--about on a par with that of the corresponding
1970 estimates.
Growth of GNP Components: Changes in Procedure. For most
components of Soviet GNP in 1982 prices, our methods of
estimating growth are the same as those described in USSR:
Measures for GNP in 1970 prices." There have been
modifications, however, in the estimation methods for industry,
repair and personal care services, and recreation services.
Industry. The basic methods used to estimate industrial
growth are the same as before, but the sample of products has
changed:
40See especially pp. 83-123, 179-190, 219-229, 241-244, 253-259,
337-352.
40
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o Products have been added to the samples for two branches-
-wood, pulp, and paper, and construction materials.
o Products for which detailed breakdowns are no longer
available have been combined in the samples for each of
four branches--ferrous metals; chemicals; wood, pulp, and
paper; and construction materials.
o Data on coal and gas production have been adjusted for
changes in energy content.
Repair and Personal Care. The repair and personal care
sector includes both state-administered and privately provided
services such as laundry, dry cleaning, barber and beauty shops,
and repair of household appliances, automobiles, and housing.
Very little information is available for the private component of
the sector, and much of the information that is available is
ambiguous in both coverage and valuation. Because of the lack of
data, we assume that output of these private services has
increased at a constant rate of 1 percent per year on a per
capita basis. This assumption replaces a set of scattered--and
probably inconsistent--observations for a few years, on which
growth estimates in 1970 prices were based. The growth of state
,
services in prices of both 1982 and 1970 is based on Soviet value
data in prices officially described as "comparable."
Recreation. Estimates of the growth of recreation services
are based on new information, including a revised sample of
services provided by that sector. For the resorts and leisure
41
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component of recreation, estimates of growth now are combined,
instead of being made separately, as was done for our estimates
in 1970 prices. Moreover, the sample of services for this new,
combined category adds data on the number of persons using rest
bases and tourist hotels to earlier data on persons using
sanatoriums, resorts, and rest homes. Data on hotel use (with
employment in hotels serving as a proxy for the number of persons
accommodated) have been dropped from the sample. The growth of
the entertainment component of recreation is estimated, as
before, from data on paid attendance at movies and theaters.
42
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RELIABILITY OF ESTIMATES OF GROWTH
Measures of economic growth are subject to errors and
uncertainties in any country--even one with a good, open
statistical system--and the CIA's estimates of Soviet GNP growth
are no exception.41 Recently, for example, criticisms of
official Soviet statistics have drawn renewed attention to
sources of potential overstatement in some of the data we use to
estimate GNP growth. Some of the other data used for our
estimates, on the other hand, are widely believed by Western
economists to understate growth.42
Estimates of the growth of total GNP are subject to
uncertainty in (1) measuring the growth of the individual sectors
of origin and (2) deriving the weights of these sectors in the
base year. In addition, estimates of the growth of end uses are
affected by inaccuracies, although these estimates are not used
in determining total GNP growth. The potential for errors from
each of these sources is reviewed below, and the likely impact on
41Western specialists have written many books and journal
articles on the selection and refinement of estimating methods.
An annotated bibliography of much of the literature is provided
in Dan Usher, The Measurement of Economic Growth (New York:
Columbia University Press, 1980), in the notes at the end of each
chapter.
42We have made a number of efforts--most recently in USSR:
Measures--to alert users of GNP estimates to potential
measurement problems. For earlier discussions of such problems,
see Stanley H. Cohn, "National Income Growth Statistics," and
Rush V. Greenslade, "Industrial Production Statistics in the
USSR," in Vladimir G. Treml and John P. Hardt, eds., Soviet
Economic Statistics (Durham, N.C.: Duke University Press, 1972),
chapters 5 and 7.
43
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total GNP growth is assessed. In our judgment, this impact is
generally not severe--although it cannot be dismissed--partly
because errors in opposite directions offset each other to some
extent. Finally, some avenues for future improvements in our GNP
estimates are noted.
Growth by Sector of Origin
There are several criteria for assessing the reliability of
the estimate of growth for a particular sector of origin:
o How well the sample of the sector's products represents
the full range of its output.
o How well the kinds of data available for these products
reflect trends in the sector's real output, including
changes in the mix and quality of products.
o How closely trends in value added are matched by trends
in the proxy for it--such as gross output.
In the rest of this section, we discuss these criteria in turn
and evaluate the extent to which our sector-of-origin estimates
satisfy them.
Adequacy of Samples. Because the availability of Soviet
data on the production of individual products is limited, our
samples are not selected randomly. Rather, we use as much
regularly published data as possible, except that items already
covered in larger product categories are excluded.43 In
43Products for which we have not yet been able to derive base-
year prices, such as various kinds of household chemicals, are
excluded also.
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addition, we estimate production of goods about which the Soviets
release little or no information--notably military machinery,
nonferrous metals, and refined oil. Estimates of output in
selected years also are made as needed to fill gaps in statistics
for other products--for example, some chemicals and construction
materials.
On balance, we believe that our samples provide adequate
coverage. For industry and agriculture--the two largest sectors
of origin--approximate shares of gross output represented by the
samples can be calculated.44 The industrial sample covers nearly
60 percent of civilian output in the base year (1982), with
branch coverage ranging from a high of about 80 percent for
electric power to a low of roughly 35 percent for nonferrous
metals. The sample for agriculture covers approximately 90
percent of base-year output. Coverage of transportation is also
judged quite complete--about equal to that in agriculture in the
base year--although we have not made a numerical estimate for
this sector.
Kinds of Data in Samples. The predominant kind of data in
the sample for each sector of origin generally points to the
direction of any error in estimates of the sector's growth. In
the West, most experts believe that data on current values of
output, deflated by price indexes as accurate as those available
for Western countries, provide better estimates of growth than
44The calculations here are updates of similar estimates for
1970, reported in USSR: Measures, pp. 207-209, 257-258.
45
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data on quantities of output, weighted by prices of a fixed year.
The principal reason is that deflated values permit better
coverage of new products and of improvements in quality than
quantity indexes do, especially when innovation is rapid. Also,
price indexes estimated from samples are generally believed to
represent changes in the prices of excluded goods better than
sample quantity indexes represent excluded quantity changes.45
Official Soviet price indexes are sparse, however, and
Western economists have found many of them unreliable."
Moreover, data on current values often are not published. This
leaves us with a choice between:
45See T.P. Hill, The Measurement of Real Product: A Theoretical
and Empirical Analysis of the Growth Rates for Different
Industries and Countries (Paris: Organization for Economic
Cooperation and Development, 1971), pp. 25-26, 41-42, 58-59; and
Usher, The Measurement of Economic Growth, chapter 8. The
advantages of deflated value data also are discussed in USSR:
Measures, pp. 42-43.
But even when deflated value data are widely available, as
they are in the United States, measurement problems are not
eliminated. Until a few years ago, for example, in the absence
of a satisfactory price index for computers, the Department of
Commerce assumed that US computer prices had not changed. When a
new index was developed, it showed that computer prices had
declined sharply (at an average annual rate of 14 percent between
1972 and 1984), so that real growth of computer output had been
underestimated. Some economists are now criticizing the new
index, however, arguing that computer prices declined at only
about half the rate estimated by Commerce. See "Revised
Estimates of the National Income and Product Accounts of the
United States, 1929-85: An Introduction," Survey of Current
Business (December 1985): pp. 16-17; and "Gross Product by
Industry: Comments on Recent Criticisms," Survey of Current
Business (July 1988): pp. 132-133.
"For a comprehensive discussion of Soviet price indexes, see
Morris Bornstein, "Soviet Price Statistics," in Treml and Hardt,
eds., Soviet Economic Statistics, chapter 16.
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o Data on quantities of output in physical units--such as
tons, items, or square meters--which are multiplied by
base-year prices to obtain values. These statistics are
generally considered reliable indicators of physical
volume, but they dc ot capture the full extent of
changes in product mix and quality.
o Data on values of output in prices officially described
as "comparable," which are taken directly from Soviet
statistical yearbooks. Almost all Western experts, and
now most Soviet economists, believe that these statistics
overstate growth because practices for pricing new
products in the USSR exaggerate the extent of quality
improvements.
Ouantity Data. Over the years, Western inquiries into the
reliability of Soviet official statistics generally have found
physical quantity data to be acceptable.47 Producing enterprises
have incentives to distort their reports to statistical
authorities because a substantial share of the incomes of workers
47Two recent studies--both drawing on 'interviews of Soviet
emigres--are Susan J. Linz, "Managerial Autonomy in Soviet
Firms," Soviet Studies (April 1988): pp. 175-195; and Stephen
Shenfield in collaboration with Philip Hanson, "State Statistical
Work in the USSR: Findings from Interviews with Former Soviet
Statistical Personnel" (Washington: National Council for Soviet
and East European Research, 1986). For evaluations of a wide
variety of Soviet statistics, including quantity data on
industrial and agricultural output, see Trend and Hardt, eds.,
Soviet Economic Statistics, especially chapters 1 and 7-12. An
earlier standard reference on industrial statistics is Gregory
Grossman's Soviet Statistics of Physical Output of Industrial
Commodities: Their Compilation and Quality (Princeton:
Princeton University Press, 1960).
47
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and managers depends on reported output. Nonetheless, the
Western studies have concluded that the extent of distortion in
reporting usually is limited, in part by periodic audits and by
penalties for falsification. There are exceptions--for example,
the recent scandal over the exaggeration of cotton production
statistics in Soviet Central Asia.48 As in that case, most of
the distortions are believed to involve overstatement of output--
especially to enable enterprises to claim fulfillment of
production plans. On the other hand, understatement can also
occur--for example, when managers try to hold down targets in
future plans.
Even if levels of output are distorted, estimates of growth
based on these levels can remain accurate if the extent and
direction of misreporting do not change over time. Some thirty
years ago, Alec Nove formulated a "law of equal cheating,"
hypothesizing that, "Over the economy as a whole, there is no
reason to suppose that Soviet managers and their accountants
falsify more in one year than in another, so the rate of growth
is unlikely to be exaggerated on that account." Subsequent
research by Grossman indicated that incentives and opportunities
for cheating were subject to year-to-year variations but that
information on the quantitative effects of such variations was
lacking." In any event, the effects on estimates of growth over
48A chronology of the scandal appears in Business Week (6 July
1987): p. 45.
49Both the quotation of Nove and Grossman's conclusions are from
Grossman's Soviet Statistics of Physical Output, p. 133.
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longer periods still may be small if distortions in annual
changes are in opposite directions.
In the last few years, some Western analysts have claimed
that Soviet statistics on physical quantities of output have
become increasingly overstated." Anecdotal evidence of
exaggeration in such measures does seem to be surfacing with
increasing frequency in the Soviet press. This evidence,
however, may reflect the leadership's policies more than the
accuracy of the basic data. Official scrutiny of statistical
reporting has tightened as a result of a series of campaigns
against corruption, and unofficial criticism of statistics has
surged in response to Gorbachev's policy of glasnost. Still,
information of the kind that would be needed to adjust for
changes in the accuracy of measures of physical output remains as
inadequate and unconvincing as it was at the time of Grossman's
study. Like Western researchers, moreover, Soviet critics of
official statistics generally accept these physical quantity data
while rejecting output measures in comparable prices.51
50See, for example, Richard E. Ericson, "The Soviet Statistical
Debate: Khanin vs. TsSU," paper presented at Hoover Institution-
RAND Corporation Conference on the Defense Sector and the Soviet
Economy (Stanford University, 23-24 March. 1988; revised May
1988), p. 10.
510ne of the most prominent Soviet critics, Grigoriy Khanin, has
made extensive use of physical measures of industrial production
and has endorsed official indexes of agricultural output and
railroad transportation. The only quantity data that he
explicitly rejects are those for truck transportation. See G.I.
Khanin, "Al'ternativnyye otsenki rezul'tatov khozyaystvennoy
deyatel'nosti proizvodstvennykh yacheyek promyshlennosti"
(Alternative Estimates of the Results of the Economic Activity of
Productive Units of Industry), Izvestiya akademii nauk SSSR:
seriya ekonomicheskava (No. 6, 1981): pp. 64, 72; and "Puti
sovershenstvovaniya informatsionnogo obespecheniya svodnykh
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Nonetheless, growth estimates based on physical quantity
data fail to capture the full extent of changes in product mix
and quality, including the introduction of new products as an
extreme case. In a growing economy, these changes typically are
improvements, although there are exceptions--in the USSR,
primarily raw materials, such as coal and iron ore.
Ideally, quantity data should be detailed enough to reflect
changes in product mix but still comprehensive enough to provide
good coverage of output. Unfortunately, data that meet both of
these requirements are seldom available. We do select and adjust
.the quantity data used in our samples, however, in an effort to
capture as many changes in product mix and quality as possible.
For example:
o Sample data are used in as much detail as possible--
including estimated breakdowns for some data published
only in summary form. Trucks and passenger cars, for
instance, are disaggregated by model.
o Standardized units of physical measure are used whenever
available--such as for fertilizers, generators, and
turbines.
o Explicit adjustments for quality,are made in some cases,
such as coal, cement, and flour.
planovykh narodnokhozyaystvennykh raschetov" (Ways of Improving
the Information Supply for Aggregate National Economic Planning
Calculations), Izvestiya akademii nauk SSSR: seriya
ekonomicheskaya (No. 3, 1984): p. 60.
50
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Value Data. Soviet value data in so-called comparable
prices are supposed to serve the same function as Western
economic statistics in constant prices--that is, to measure
output excluding the effects of price changes (see inset). In
the USSR, however, comparable prices include a substantial degree
of disguised inflation, largely because of two features of the
way prices are established for new products.52
First, producing enterprises benefit financially from making
minor alterations in familiar products and using the
"improvements" as an excuse for increasing prices. The increases
are then reflected in output reported to the statistical
authorities incomparable prices, as well as in revenues from
purchasers of new products. At the same time, production of
older,
cheaper items
little choice but to
switch
suppliers are
can be stopped, leaving purchasers with
accept the new ones. Opportunities to
rare under Soviet conditions of few markets
and chronic shortages. Besides, enterprises that pay higher
prices for inputs often can make minor changes in their own
52Inflation in the prices of new products has been discussed
widely in Western literature on the Soviet economy. See, for
example, Joseph S. Berliner, The Innovation Decision in Soviet
Industry (Cambridge, Mass.: MIT Press, 1976), pp. 235-360. This
subject is also discussed in USSR: Measures, pp. 13, 44, 181,
213-214, and the sources cited there.
For a skeptical view of Western estimates of substantial
disguised inflation in the USSR, see Steven Rosefielde, False
Science: Underestimating the Soviet Arms Buildup, revised second
edition (New Brunswick, N.J.: Transaction Books, 1987), pp. 101-
148. Recently, however, Rosefielde has expressed willingness to
accept the possibility of rather high rates of disguised
inflation. See his "The Soviet Economy in Crisis: Birman's
Cumulative Disequilibrium Hypothesis," Soviet Studies (April
1988): pp. 222-244.
51
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INSET
Comparable Prices, Soviet Style
Prices are set administratively in the USSR and are changed
only infrequently for standard products, which include most
goods. Comparable prices (sopostavimyye tseny), which are used
along with current prices in reporting output to the statistical
authorities, are set for a given base year--usually the year of a
general price revision:
o For goods in series production in the base year, comparable
prices are simply list prices (postovannyye tseny) of that
year.
o For products introduced later, comparable prices are the
first list prices established--at the time the decision to
begin series production is taken. No adjustment is made
for any changes that may have occurred since the base year
in the costs of inputs, which play a major role in
determining prices.
o For products too new or unique to have entered series
production, the only prices available are temporary prices
(vremennyye tseny) or one-time prices (razovyve tsenv). By
default, these prices are accepted as comparable, even
though they are supposed to be reduced when or if series
production begins.
Over the years, Soviet economists have provided many
examples of inflated prices for new products. The following
illustration is recent and striking:
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In the last five-year plan period, machine builders
mastered the production of approximately 3,000 types of
new products per year on average (for comparison: all
other branches of industry, taken together, mastered only
700 types per year). Naturally, there are no prices for
these items on the price lists; they have to be
established from scratch.
The price usually grows to a much greater extent than the
user characteristics of the product improve. An ordinary
lathe manufactured by the capital's "Krasnyy proletariy"
plant, say, costs about 5,500 rubles. The same lathe
with a numerical programming mechanism costs 40,000, and
one fitted with a robot as well costs 70,000 rubles. How
much more productive is a machine supplied with all the
wonders of technology than an ordinary one? Half again
as productive.
The permanent price ... usually differs little from the
temporary one.?1
END INSET
aVasiliy Selyunin and Grigoriy Khanin, "Lukavaya tsifra" (Cunning
Figures), Novyy mir (No. 2, 1987): p. 182.
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products and thus pass the inflated costs along to their
customers.
Second, even products incorporating genuine improvements are
assigned high prices at first to cover the research, development,
and other costs of the initial stages of production. High
temporary prices are supposed to be replaced by lower permanent
prices within a few years. Typically, however, producing
enterprises attempt to postpone any reduction as long as possible
and keep the permanent price as high as possible.
Soviet value data are published regularly for a number of
products, mostly machinery. Despite their shortcomings, we use
these value data in two kinds of circumstances:
o When measures of output in physical units are unavailable.
o When improvements in product mix and quality would be
seriously understated by physical measures.
For machinery, where these conditions often prevail, value data
make up roughly 40 percent of our sample in the base year. The
shares of value data in the samples for other branches of
industry are smaller--ranging from zero for metals, energy,
construction materials, and processed food to 30 percent for
light industry.53
Proxies for Value Added. As mentioned earlier (in the
overview of estimating methods), we use proxies to estimate the
real growth of value added in all sectors of origin except
53The calculations here are updates of similar estimates for
1970, reported in USSR: Measures, p. 215.
52
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agriculture. The most important--and the most reliable--of these
proxies is gross output, on which our estimates for industry,
transportation, and trade are based.
Gross Output. Because gross output includes intermediate
inputs as well as value added, its growth will differ from value-
added growth if the proportions of these components change.
Residual calculations of value added itself--as the difference
between gross output and intermediate inputs--also are subject to
?errors, however, if the output and input data are inaccurate.
Research by T.P. Hill has indicated that using gross output as a
proxy is likely to provide more accurate results than calculating
value added as a residual (1) when there is no clear evidence
that the proportions of intermediate inputs and value added have
changed and (2) when estimates of intermediate inputs are subject
to large errors.54
For our estimates of Soviet industrial growth, the effects
of changes in the proportions of value added and intermediate
inputs should be minimized by the detail in which value-added
weights are available--for subbranches such as machine tools and
automobiles, as well as for branches such as machinery.
Moreover, rough calculations of the growth of value added as a
54The Measurement of Real Product, pp. 19-22, 57-58, 98-105, 111-
112, 118. Hill's results are also discussed in USSR: Measures,
pp. 44-45, 186.
53
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residual matched gross-output proxies reasonably well during
1959-72.55
Studies of US industrial growth also suggest that estimates
based on gross-output proxies--which are constructed by the
Federal Reserve Board--have been quite close to residual
estimates of value added--which are made by the Department of
Commerce. Jack Gottsegen and Richard Ziemer found that the
average annual growth of all manufacturing industries during
1948-64 was 4.2 percent using gross-output proxies--less than
half a percentage point faster than the rate of 3.8 percent based
on value added. For most individual industries, rates of
increase estimated using both methods were within a percentage
point of each other.56
Intermediate Inputs. For the construction sector,
intermediate inputs--mostly of industrial products--are used as a
proxy for value added. In general, this proxy is not considered
as reliable as gross output, partly because input data often are
55These residual calculations were made possible by the
availability of input-output tables in 1970 prices for 1959,
1966, and 1972. See USSR: Measures, pp. 211-212.
56See Jack J. Gottsegen and Richard C. Ziemer, "Comparison of
Federal Reserve and OBE Measures of Real Manufacturing Output,
1947-64," in John W. Kendrick, ed., The Industrial Composition of
Income and Product, Studies in Income and Wealth, Vol. 32 (New
York: Columbia University Press, 1968), pp. 225-347. In a paper
discussed below, Michael Boretsky obtained similar results for
the 1959-77 period. See "The Tenability of the CIA Estimates of
Soviet Economic Growth," Journal of Comparative Economics
(December 1987): pp. 524-525. More recently, the Department of
Commerce reported that 1972-85 growth rates based on gross output
and value added remained quite close but did not examine the
reasons for differences as extensively as Gottsegen and Ziemer
did. See "Gross Product by Industry," p. 133.
54
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subject to greater uncertainty than output data. Aside from data
problems, moreover, gross output includes value added, but
intermediate inputs and value added are mutually exclusive
measures.57 Nonetheless, past tests of the procedures we use--
during their initial development by Raymond Powell and, later,
for our estimates of GNP in 1970 prices--have shown them to be
satisfactory.58 More recently, Bergson has found new support for
the proxy by observing that the price changes implied by our
estimates of construction growth are consistent with independent
calculations of price indexes from Soviet data on construction
costs and profits.59
Labor Inputs. Our estimates of growth in a number of
service sectors are based on labor inputs--measured in work
hours--as a proxy for value added. This proxy almost certainly
understates growth because it does not reflect any gains made in
labor productivity. Moreover, our data on labor inputs are not
detailed enough to reflect changes in the composition and quality
of the labor force, such as a rising proportion of more skilled
and educated workers. Given the sparsity of Soviet data on
services, however--partly because of the,Marxian view that all
57 For further elaboration of this point, see Hill, The
Measurement of Real Product, pp. 21-22.
58See Raymond P. Powell, "An Index of
1927/28 to 1955," Review of Economics
pp. 170-177; and USSR: Measures, pp.
59"On Soviet Real Investment Growth,"
pp. 411-412, 419.
- 55
Soviet Construction,
and Statistics (May 1959):
83-87.
Soviet Studies (July 1987):
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services except those contributing directly to material output
are "nonproductive"--we have few alternatives.
Even in Western countries, labor inputs are the only data
readily available for some service sectors--mainly education and
government services. Most Western countries, however, are able
to measure these inputs in ways that capture at least some
changes in the composition of the labor force. Data on deflated
wages often are used instead of data on work hours, and even when
this is not the case, Western data are more detailed than those
for the USSR."
Criticisms of Estimates. While we would like to minimize
errors of all kinds in our estimates of GNP growth by sector of
origin, perhaps the most important task is to minimize bias--that
is, errors mainly in one direction. - The possibility of biased
estimates--whether too high or too low--is greatest for industry
and services, so it is not surprising that criticisms have
focused primarily on these sectors.
Industry. Our estimates of Soviet industrial growth include
sources of both understatement and overstatement, and they have
been challenged on both counts. The most detailed charges of
downward bias have come from Michael Boretsky, who claims that we
rely too heavily on quantity data and that our sample does not
60See Organization for Economic Cooperation and Development,
Department of Economics and Statistics, Measurement of Value
Added at Constant Prices in Service Activities (Paris:
Organization for Economic Cooperation and Development, 1987), pp.
6-14; and Hill, The Measurement of Real Product, pp. 56-57.
56
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represent the range of industrial output adequately.61 In
criticizing our reliance on quantity data, however, he mentions
only in passing our use of value data--especially for machinery.
And he barely acknowledges our efforts to make the quantity data
we use reflect as many changes in product mix and quality as
possible.
In an indirect test, Boretsky has used our sample and
methods--with some modifications--to calculate the growth of
industry in the United States and the Federal Republic of
Germany. Because his calculations imply substantially lower
growth rates than indicated by official statistics for those
countries, he faults our procedures. We would not expect a
sample designed for Soviet industry, however, to represent US and
West German output well. The vast differences between the USSR
and these Western countries--in economic systems and policies,
levels of economic development, and endowments of natural
resources--are likely to result in major differences in the mix
of output.
61"The Tenability of the CIA Estimates of Soviet Economic
Growth," Journal of Comparative Economic (December 1987): pp.
517-542. Also see John Pitzer's rebuttal, "The Tenability of the
CIA Estimates of Soviet Economic Growth: A Comment," Journal of
Comparative Economics (September 1989).
The criticisms of other Western economists have been less
severe. Padma Desai, for example, has pointed out sources of
downward bias in our estimates of industrial growth but also
acknowledged upward bias in official Soviet figures. See "Total
Factor Productivity in Postwar Soviet Industry and Its Branches,"
Journal of Comparative Economics (March 1985): pp. 18-20. In
some of her work, she has used averages of CIA and Soviet series.
See "On Reconstructing Price, Output, and Value-Added Indexes in
Postwar Soviet Industry and Its Branches," Oxford Bulletin of
Economics and Statistics (February 1978): pp. 60-62.
57
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Furthermore, Boretsky goes on to implicitly endorse official
Soviet aggregate measures of industrial growth. His argument is
based on the observation that differences between official growth
rates for the United States and the Federal Republic of Germany--
which are widely regarded as highly reliable--and his
calculations for these countries are similar to differences
between Soviet official growth rates and our estimates. In
presenting this case, Boretsky ignores the voluminous record of
Western and Soviet criticism of the USSR's official statistics--
especially on growth in machinery output.
. Indeed, the shortcomings of these official statistics have
received renewed attention in the last few years. Several Soviet
economists--notably Vasiliy Selyunin and Grigoriy Khanin--have
criticized statistics on the growth of industry overall and
machinery in particular.62 The charges of these recent critics
are similar to those raised by an older generation of Soviet
experts in the 1960s, and even earlier in the West.63
62For Western discussions of the work of Selyunin and Khanin, see
CIA, Revisiting Soviet Economic Performance Under Glasnost:
Implications for CIA Estimates (SOV 88-10068, September 1988);
Richard E. Ericson, "The Soviet Statistical Debate"; Vladimir
Kontorovich and Boris Rumer, Inflation'iri the Soviet Investment
Complex (Princeton Junction, N.J.: Command Economies Research,
May 1988); and Fyodor Kushnirsky, "New Challenges to Soviet
Official Statistics: A Methodological Survey," in CIA Conference
Report, The Impact of Gorbachev's Policies on Soviet Economic
Statistics (SOV 88-10049, July 1988). The CIA and Kontorovich-
Rumer papers also discuss the work of other Soviet critics in
some detail.
63For a review of the early Soviet criticisms, which focused
largely on statistics on machinery output and investment, see
Abraham S. Becker, "The Price Level of Soviet Machinery in the
1960s," Soviet Studies (July 1974): pp. 363-379. Early Western
assessments of Soviet statistics are cited and summarized in
58
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In the era of glasnost, some of the critics have been able
to go beyond their predecessors in publishing alternative
estimates of growth that cover relatively broad categories of
output and long periods of time. It appears, however, that these
alternative estimates are based so extensively on output data in
physical units that they are unable to capture changes in product
mix and quality.64
Fyodor Kushnirsky has suggested that Soviet economists may
neglect quality improvements because product changes are
initiated by producers in the USSR and often are not useful to
purchasers.65 For example, manufacturers may increase production
of large-capacity trucks when the primary needs of the
transportation system are for small and medium-size vehicles.
Even though purchasers in the. Soviet economy have few choices,
however, some improvements in quality undoubtedly are genuine.
One Soviet expert on machinery has cited such improvements in
support of his view that "It is not possible, of course, to judge
Abram Bergson, The Real National Income of Soviet Russia, pp. 3-
4.
64The Selyunin-Khanin estimates also make use of a number of
shortcut procedures, such as estimating Soviet industrial output
(by sector) on the basis of the relatidnship between output and
electricity use in the United States and actual Soviet
electricity use.
65"New Challenges to Soviet Official Statistics," pp. 19-20.
Kushnirsky's own research has indicated significant improvements
in the quality of passenger cars--enough to explain most of the
increases in their wholesale and retail prices during 1976-82
(ibid.).
When GNP is valued at factor cost, measures of quality
improvement should be based on increases in the costs of
producing higher-quality output. Such measures should be
understood, however, to apply only to improvements for which
purchasers are willing to pay.
59
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growth of the production of machinery and equipment only by the
number of units produced.11166
Services. Boretsky and Mark Prell both maintain that our
estimates of the growth of services are too low. Their arguments
are based on our use of quantity data in estimates of housing
growth and of labor inputs as a proxy for value added in several
other service sectors. We have acknowledged that these estimates
are understated, but we do not believe the degree of bias is as
great as Boretsky and Prell claim.67
As in his, criticism of our estimates of industrial growth,
Boretsky's judgment is based on his application of our estimating
procedures to US and West German data." Prell also tests our
procedures using US data and then goes on to develop his own
estimates of services growth in the USSR." His estimates for
66D.M. Palterovich, "Problemy ispol'zovaniya strategicheskikh i
takticheskikh rezervov mashinostroyeniya," (Problems of Using the
Strategic and Tactical Reserves of Machine Building) Ekonomika i
matematicheskiye metodv (No. 4, 1987): p. 591.
A CIA study also supports the view that the quality of
Soviet machinery has improved. The results of this study
indicate that the quality of several types of construction
machinery improved significantly from 1960 to 1973--although
price increases often exceeded quality ,improvements. See CIA
Research Paper, An Analysis of the Behavior of Soviet Machinery
Prices, 1960-73 (ER 79-10631, December 1979).
67See, for example, USSR: Measures, pp. 112-113, 344-345, 349.
68Boretsky has also criticized our estimates of construction
growth, arguing that he obtained inaccurate results when applying
them to the US construction sector. See "The Tenability of the
CIA Estimates," pp. 526-527, 532.
69The Role of the Service Sector in Soviet GNP and Productivity
Estimates (Ph.D. dissertation, Massachusetts Institute of
Technology, 1987); and "The Role of the Service Sector in Soviet
GNP and Productivity Estimates," Journal of Comparative Economics
60
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housing are based on official Soviet data on the value of the
stock of housing capital in comparable prices. Like Soviet data
on output in such prices, these housing data overstate growth
because they include disguised inflation.
For the other services he considers, Prell uses inputs of
labor and capital combined as a proxy for value added, assuming
that the productivity of these combined inputs (factor
productivity) is constant. His labor data are the same as ours,
and his capital data again are official Soviet stock values in
comparable prices.
His assumption of constant factor productivity implies
faster output growth than our assumption of constant labor
productivity because capital inputs have grown faster than labor
inputs. According to our estimates, however, factor productivity
in the Soviet economy overall and in many individual sectors has
been decreasing since the early to middle 1970s. Prell's
procedures thus provide a way to allow for gains in labor
productivity, but we believe that both his productivity
assumption and his use of inflated Soviet capital data overstate
the growth of services.
Potential Impact of Errors. Rough impressions of the
quantitative importance of sources of upward and downward bias in
our estimates of sectoral growth can be obtained from comparisons
with alternative estimates. As in the preceding section, we
(September 1989). Also see the response by Laurie Kurtzweg, "The
Role of the Service Sector in Soviet GNP and Productivity
Estimates: A Comment," Journal of Comparative Economics
(forthcoming, December 1989).
61
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focus on industry and services because we are more concerned
about bias than about other errors (see inset). While our
estimates for agriculture and the smaller sectors, like
transportation and trade, are subject to inaccuracies, there is
no reason to expect that they are biased.
Industry. Within industry, our growth estimates are likely
to be understated for several branches where samples consist
primarily of quantity data, but probably overstated for the
machinery branch, where the sample includes a large share of
Soviet value data in comparable prices.
The growth of any branch whose sample is dominated by
quantity data may be biased downward. The degree of bias is
likely to be minor, however, unless improvements in the mix and
quality of output are rapid. We can get a sense of the potential
underestimation by comparing our growth rates for the non-
machinery branches with official Soviet statistics (see table
8).70 If we view the official rates tentatively as upper bounds,
this comparison suggests that there is little bias in our
estimates for fuels and electric power, where rapid improvements
in product mix and quality would not be expected. The branches
for which underestimation is likely to be greatest are chemicals
70Because of differences in the construction of our estimates and
official Soviet indexes, the results of this comparison should be
interpreted with caution. Our base year (1982) is fixed, for
example, while Soviet indexes reflect a series of linked base
years (1952, 1955, 1967, 1975, and 1982). Also, we use value-
added weights for branches of industry (such as machinery) and
subbranches (such as automobiles), while Soviet indexes are based
on gross-output weights.
62
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INSET
Cumulative Impact of Bias
Any judgment about how much bias is acceptable in our
estimates of the growth of GNP and its major components must be
subjective. In this paper, biases up to plus or minus 0.5
percentage point in average annual rates of change are considered
acceptable, given the general difficulty of accurate estimation.
If a 0.5 percentage point bias persisted over the entire 37-year
period covered here, however, its cumulative impact on the index
of growth would be fairly substantial--an overstatement or
understatement of 20 percent (see table). Potential biases of 1
or even 2 percentage points per year are treated as provisionally
acceptable in estimates of the growth of some GNP components, but
not of total GNP. When biases are this large, however, we
recognize the need for further research on improving our
estimates.
Bias in Average Index of Cumulative Effect After
Annual Growth Rate 10 Years 20 Years 30 Years 37 Years
(Percentage points) (Correct index = 100)
0.1
101
102
103
104
0.2
102
104
106
108
0.3
103
106
109
112
0.4
104
108
113
116
0.5
105
110
116
120
1.0
110
122
135
145
1.5
116
135
156
173
2.0
122
149
181
208
END INSET
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Table 8
USSR: Comparison of CIA Estimates of Industrial Growth
With Official Soviet Statistics, 1951-87
Average Annual Rates
Total industry
1951-60
1961-70
1971-80
1981-87
1951-87
CIAa
8.6
6.3
4.0
2.2
5.5
Sovietb
11.7
8.6
5.9
3.9
7.8
Ferrous metals
CIAa
9.5
6.4
2.5
1.3
5.2
Sovietb
10.4
6.8
3.5
1.9C
6.3c
Fuels
CIAa
9.3
6.0
4.2
1.4
5.5
Sovietb
9.3
6.2
4.4
1.6
5.6
Electric power
CIAa
12.3
9.7
5.8
3.3
8.1
Sovietb
13.7
10.6
6.1
3.7
8.9
Machinery
CIAa
7.4
6.6
5.1
2.4
5.6
Sovietb
15.4
12.1
9.9
6.3
11.2
Chemicals
CIAa ,_
10.7
10.0
5.6
3.8
7.8
SovietP
14.7
13.3
8.1
5.0
10.6
Wood, pulp, & paper
CIAa
Soviet b
6.4
8.0
2.7
5.3
1.0
3.3
2.7
3.6
3.2
5.2
Construction materials
CIAa
15.7
5.9
3.1
2.3
7.0
Sovietb
18.4
8.6
4.5
3.4
9.0
Light industry
CIAa
8.0
4.5
2.5
1.6
4.3
Sovietb
9.6
5.5
4.0
1.5
5.4
Food industry
CIAa
9.1
6.4
2.7
1.1
5.1
Sovietb
8.9
6.6
3.4
3.8
5.8
aGrowth of total industry is calculated from indexes of branch growth,
weighted by value added at 1982 factor cost. Branch growth is
calculated from indexes of gross output by subbranch, weighted by
value added in 1982 producers' prices (established prices, excluding
turnover taxes and subsidies).
bGrowth of total industry and its branches is calculated from values
of gross output in comparable producers' prices (established prices,
excluding turnover taxes and subsidies) of a series of linked base
years (1952, 1955, 1967, 1975, and 1982).
cEnd year is 1984.
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and, to a lesser extent, construction materials and wood
products.
For the machinery branch, our estimates of growth probably
are somewhat overstated, although they are well below official
Soviet figures (table 8). We can roughly gauge the possible
degree of overstatement by comparing our growth rates with
alternative Western and Soviet estimates that rely more heavily
on quantity data (see table 9).71 Using a sample of civilian
machinery based entirely on quantity data, Vladimir Treml has
estimated average annual growth at rates 1 to 2 percentage points
below ours for civilian machinery.72 These differences in growth
rates appear reasonable as rough upper limits on the degree of
overstatement in our estimates.
Services. As mentioned earlier, our estimates of growth in
some service sectors are almost certainly understated. The
growth of housing is estimated from data on changes in the total
stock of living space, without adjustment for qualitative
improvements. Although the rate of quality change probably has
not been rapid, it undoubtedly has beeri positive. Growth also is
likely to be underestimated for health, education, and government
services, where we use labor inputs as a proxy for value added.
71-Special caution is required in interpreting the unofficial
Soviet estimates because little is known about the methods on
which they are based.
72Treml's estimates of output growth are one result of a larger
study of changes in machinery prices. See "Price Index for
Soviet Machinery, 1965-1986" (manuscript, September 1988).
63
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Table 9
USSR: Comparison of CIA and Alternative Estimates
of Machinery Growth, 1961-85
Average Annual Rates
CIAa
Tremlb
Selyunin
& Khaninc
Val'tukh
Lavrovskiyu
1961-65
7.1
NA
8.7
10.7
1966-70
6.2
6.4
5.5
5.9
1971-75
7.2
5.2
5.1-6.2
4.7
1976-80
3.0
2.7
2.0-3.1
1.2
1981-85
2.0
2.8
0.2-1.2
NA
1961-85
5.1
NA
4.3-4.9
NA
1966-80
5.4
4.8
4.2-4.9
3.9
aGrowth of total machinery, calculated from indexes of gross output by
subbranch, weighted by value added in 1982 producers' prices
(established prices, excluding turnover taxes and subsidies).
bGrowth of civilian machinery, calculated from indexes of gross output
by subbranch, weighted by gross output in 1982 producers' prices
(established prices, excluding turnover taxes and subsidies). See
Vladimir G. Treml, "Price Index for Soviet Machinery, 1965-1986"
(manuscript, September 1988), p. 21.
cGrowth calculated by dividing official index of total machinery
output by Selyunin and Khanin's index of disguised inflation,
presumably for total machinery. See Vasiliy Selyunin and Grigoriy
Khanin, "Lukavaya tsifra," Novyy mir (No. 2, 1987): pp. 187, 194.
dPresumably, growth of civilian machinery. See K.K. Val'tukh and B.L.
Lavrovskiy, "Proizvodstvennyy apparat strany: ispol'zovaniye i
rekonstruktsiya," Ekonomika i organizatsiya promyshlennogo
proizvodstva (No. 2, 1986): p. 29.
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We believe Prell's estimates of services growth are
overstated, but we can tentatively accept them as upper limits on
actual rates of increase (see table 10). Doing so implies that
our estimates understate the growth of services by at most 3
percentage points per year for housing and by no more than 2
percentage points annually for the sectors where labor inputs are
used as a proxy.
Growth by End Use
Although estimates of GNP by end use are not used in
calculating the growth of total GNP, they ought to portray trends
in resource allocation as accurately as possible. For several of
the components of consumption and investment, our growth
estimates reflect some upward or downward bias. Defense growth--
which is based on a nearly complete enumeration of Soviet
military purchases--also is subject to uncertainty, but we do not
believe the errors are predominantly in one direction.
Consumption. Consumption growth almost certainly is
overestimated for some components--durable goods in particular--
but underestimated for others--chiefly housing, health, and
education services. For consumption of goods, our estimates of
growth are based on samples of products, mainly using data on:73
73For a detailed description of the methods used to estimate
consumption growth and a discussion of problems of estimation,
see USSR: Measures, pp. 337-352.
64
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Table 10
USSR: Comparison of CIA and Alternative Estimates
of Services Growth, 1951-84
Average Annual Rates
Housing
1951-60
1961-70
1971-80
1981-84
1951-84
CIAa
4.0
3.5
2.5
2.5
3.2
Prellb
7.7
5.6
5.2
4.9
6.0
Education
CIAa
2.8
4.8
2.4
0.9
3.0
Prellb
4.1
5.5
3.8
2.5
4.2
Health
CIAa
4.5
3.7
2.0
1.6
3.2
Prellb
5.9
4.7
4.0
3.6
4.7
Science
CIAa
10.2
7.7
4.6
1.8
6.8
Prellb
7.7
6.9
4.6
2.2
5.9
Govt administration
CIAa
-4.2
3.5
3.5
1.6
1.0
Prellb
-2.1
4.3
3.9
1.7
2.0
aEstimates cited by Prell, based on earlier data than rest of
estimates in this paper.
bSee Mark Prell, The Role of the Service Sector in Soviet GNP and
Productivity Estimates (Ph.D. dissertation, Massachusetts Institute of
Technology, 1987), pp. 218-224, 231-232.
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o Quantities consumed for almost all foods and some soft
goods.
o Current values of retail sales, deflated by official
Soviet indexes of retail prices, for durables and about
65 percent of soft goods.74
Estimates of the growth of food consumption are subject to
possible understatement because of the preponderance of quantity
data in the sample. Quality improvements probably occur slowly
in this case, however, so bias is not likely to be appreciable.
In fact, charges of deterioration in the quality of some staples,
such as bread, appear fairly regularly in the Soviet press. For
soft goods, on the other hand, and especially for durables,
estimates of consumption growth probably are biased upward
because the Soviet retail price indexes we use to deflate retail
sales understate actual inflation.
On balance, then, we suspect that the growth of consumption
of goods is overestimated. Recent estimates by Soviet economic
research institutes of changes in retail prices provide a rough
check on this judgment. These estimates indicate that prices
rose at average annual rates of 1.5 to 3 percent between 1970 and
1987 (see table 11). In comparison, the index of retail prices
derived from our estimates of goods consumption increased at
average rates of 1.5 to 2 percent annually during the same
74The sample for soft goods also includes data on the value of
clothing production in comparable prices, which are counted here
in the 65 percent of the sample attributed to deflated retail
sales data.
65
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Table 11
USSR: Comparison of CIA and Soviet Estimates of
Inflation in Retail Prices, 1971-87
Average Annual Rates
CIAa
Soviet Research Institutes
Official
Soviet
Banksb Gosplanc
1971-75
1.6
2.0
NA
-0.1
1976-80
1.9
2.6
NA
0.7
1981-85
2.1
2.1
1.6
1.0
1986-87
2.3
NA
3.0
1.5
aBased on retail sales of consumer goods in current and constant 1982
established prices.
bCalculated from N. Buzina and V. Volodina, "Milliardy na
sbernizhkakh," Ekonomicheskaya gazeta (No. 18, 1989): p. 12.
cInflation estimates include changes in retail prices of some consumer
services, as well as goods. See A. Shmarov and N. Kirichenko,
"Inflyatsionny 'vsplesk': masshtaby i prichiny," Ekonomicheskaya
gazeta (No. 13, 1989): p. 12.
dNarodnoye khozyaystvo SSSR v 1987 g. (Moscow: Finansy i statistika,
1988), p. 433; and Narodnoye khozvavstvo SSSR v 1985 g. (Moscow:
Finansy i statistika, 1986), p. 478.
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period.75 The extent to which we underestimate inflation and
overestimate real growth probably is less than these figures
suggest, however, because the Soviet estimates of price change
apparently reflect some improvements in product mix and quality
as well as "pure" inflation.
As for consumer services, housing growth on the end-use side
of GNP is estimated in the same way as on the sector-of-origin
side and so is understated for the same reasons. Estimates of
consumption of health and education services, on the other hand,
are based on deflated material purchases as well as on the labor
inputs used in estimating GNP growth by sector of origin.76 The
inclusion of these purchases offsets at least some of the
downward bias that affects the sector-of-origin estimates of
growth because the deflator is our estimated index of retail
prices, which probably understates inflation.
Investment. Our estimates of investment growth depend
mainly on trends in the two largest components of this GNP
category: new construction and installation activity and
7 ?
5This Index is calculated by comparing our estimates of real
consumption of goods purchased through the retail trade network
with Soviet retail trade data in current prices. For more
information, see USSR: Measures, p. 351; and Gertrude E.
Schroeder and Barbara S. Severin, "Soviet Consumption and Income
Policies in Perspective," in Joint Economic Committee, Congress
of the United States, Soviet Economy in a New Perspective
(Washington: US Government Printing Office, 1976), pp. 631-632,
651.
76Material expenditures are included in our estimates of
consumption of these services because their costs include the
materials used in production as well as labor. Value added, as
already pointed out, excludes material costs.
66
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acquisition of new machinery.77 The new construction component
is estimated as total construction activity?based on the sector-
of-origin estimates discussed in the preceding section--minus
repair of worn out capital stock. Capital repair estimates are
derived mainly from budgetary expenditures on repair of plant and
equipment, deflated by price indexes for construction and
machinery, respectively.78 This procedure is subject to
inaccuracies, as already discussed, but we do not believe that
bias is a problem.
We estimate the rate of increase of the machinery component
of investment on the basis of official Soviet data in comparable
prices, which have been widely criticized by Western and Soviet
economists.79 There is general agreement that these data are
77These components make up about three-fourths of the investment
category of GNP, which also includes net additions to livestock
and capital repair--again consisting of construction activity and
machinery acquisition. Official Soviet investment statistics
include only new construction and new machinery. As noted
earlier, inventory change is part of outlays n.e.c. in our
estimates of GNP growth.
78For the details of these estimates, see USSR: Measures, pp.
117-121. In official Soviet statistics, as in GNP by sector of
origin, construction includes both new construction activity and
capital repair.
79The Western articles include Abram Bergson, "On Soviet Real
Investment Growth," Soviet Studies (July 1987): pp. 406-424;
Stanley H. Cohn, "Response to Alec Nove," Soviet Studies (April
1981): pp. 296-299; Philip Hanson, "The CIA, the TsSU and the
Real Growth of Soviet Investment," Soviet Studies (October 1984):
pp. 571-581; Hanson's "Soviet Real Investment Growth: A Reply to
Bergson," Soviet Studies (July 1987): pp. 425-430; Vladimir
Kontorovich, "Inflation in the Soviet Investment and Capital
Stock Series," Soviet Studies (April 1989): pp. 318-329;
Kontorovich and Boris Ruiner, Inflation in the Soviet Investment
Complex (Princeton Junction, N.J.: Command Economies Research,
May 1988); Alec Nove, "A Note on Growth, Investment and Price
Indices," Soviet Studies (January 1981): pp. 142-145; Nove's
"Reply to Stanley H. Cohn," Soviet Studies (April 1981): pp.
67
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subject to some disguised inflation in the prices of domestically
produced or imported machinery, or both.
Opinions about the extent of this inflation vary
considerably, however. In a survey of unofficial Soviet
literature on the subject, Vladimir Kontorovich and Boris Ruiner
have derived estimates of disguised inflation at average annual
rates ranging from 1.5 to 3 percent during the early 1970s and
from 3 to 6.5 percent during the late 1970s." Bergson, however,
has presented a case for much lower inflation rates--averaging up
to 1 percent per year in the early 1970s and at most 3 percent
annually in the late 1970s.81
In large part, these differences in estimates of disguised
inflation depend on judgments about the relationship between
official Soviet statistics on machinery investment and machinery
output. Kontorovich and Rumer argue that methods of compiling
both kinds of statistics are similar enough to be subject to
about the same extent of disguised inflation. If they are
correct, comparisons of CIA and Soviet estimates of the growth of
machinery output (like those in table 8) suggest that such
inflation could have a substantial impact on the domestic
component of machinery investment.
296-299; Nove's "Has Soviet Growth Ceased?" Manchester
Statistical Society (15 November 1983); Nove's "Soviet Real
Investment Growth: Are Investment Volumes Overstated? A Reply
to Bergson," Soviet Studies (July 1987): pp. 431-433; Rumer's
"Soviet Estimates of the Rate of Inflation," Soviet Studies
(April 1989): pp. 298-317; Peter Wiles, "Soviet Consumption and
Investment Prices and the Meaningfulness of Real Investment,"
Soviet Studies (April 1982): pp. 289-295.
80Inflation in the Soviet Investment Complex, pp. 46-58, 63-69.
81"On Soviet Real Investment Growth," pp. 408-410, 420.
68
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On the other hand, as Bergson points out, Soviet data on
machinery investment have shown considerably slower growth than
official statistics on machinery output. In fact, machinery
investment has increased at rates quite similar to those of CIA
estimates of the output of producer durables--the type of
machinery used for investment--when these measures are adjusted
to a comparable basis. Moreover, two of the Soviet authors cited
by Kontorovich and Rumer have published estimates of inflation in
both machinery investment and machinery output, and their
inflation rates are lower for investment.82
Before comparing machinery investment with our estimates of
producer durables output (below), we first adjust the investment
measure to subtract imports, which enter investment but not
domestic production, and to add exports, which enter domestic
production but not investment. Data on imports and exports of
machinery are published in official foreign trade yearbooks as
values in current foreign trade prices.83 The uncertainties
involved in making these values comparable to those used in
Soviet investment statistics are considerable, however. Perhaps
the major area of uncertainty concerns the extent to which
imports are deflated--fully, partially, or not at all--so we test
alternative adjustments in which deflated imports and imports in
82See V.K. Fal'tsman, Proizvodstvennyy potentsial SSSR: voprosy
prognozirovaniya (The Productive Potential of the USSR: Problems
of Forecasting) (Moscow, Ekonomika, 1987), pp. 72, 138; and
Palterovich, "Problemy ispol'zovaniya strategicheskikh i
takticheskikh rezervov mashinostroyeniya," p. 590.
83These import and export data are for the foreign trade category
consisting of machinery, equipment, and transportation
facilities, adjusted to exclude passenger automobiles.
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current prices are subtracted from investment.84 Further
uncertainties arise in converting foreign trade prices to
domestic prices85 and in identifying any lags between imports--or
production--of machinery and deliveries to investment."
84For Soviet statements that the imports included in investment
are not fully deflated, see the sources cited in Kontorovich and
Rumer, Inflation in the Soviet Investment Complex, pp. 18-19; and
Fal'tsman, Proizvodstvennyy potentsial SSSR, p. 27.
We calculate deflators for the 1970s by dividing official
values of machinery imports and exports in current prices by
values in comparable prices derived from V. Sel'tsovkiy, "Some
Economic-Statistical Methods of the USSR Foreign Trade
Development Analysis in the Ninth and Tenth Five-Year-Plan
Periods," Foreign Trade (No. 5, 1982): pp. 37-42. We extend
these deflators forward to the 1980s by splicing them to
Hungarian price indexes for that nation's imports and exports of
machinery.
The machinery import deflator is extended backward to the
1950s and 1960s by assuming an average annual inflation rate of 1
percent--about the same as the rate of price change for total
imports during those years. The deflator for machinery exports
is extended backward to the 1960s by splicing it to indexes of
machinery export prices published in N. Mitrofanova, "Tendentsii
dvizheniya kontraktnyky tsen v torgovle stran SEV" (Tendencies in
the Movement of Contract Prices in the Trade of CEMA Countries),
Voprosy ekonomiki (No. 8, 1978): pp. 101-106. The prices of
machinery exports are assumed not to have changed during the
1950s.
85We assume that the values of imports and exports in current
domestic prices are the same in all years as the official values
in current foreign trade prices. The basis for this assumption
is research by Vladimir Treml and Barry Kostinsky indicating that
domestic prices of machinery are linked closely to foreign trade
prices. Their research also indicates that the closeness of this
linkage has not changed much over time. See Domestic Value of
Soviet Foreign Trade: Exports and Imports in the 1972 Input-
Output Table, Foreign Economic Report No. 20 (US Department of
Commerce, Bureau of the Census, October 1982), pp. 19-24, 44, 53-
57.
86Because delays in installing machinery are common in the Soviet
economy, we have tested a one-year lag before production or
imports reach investment. This lag has little effect on the
comparison between adjusted investment and producer durables
output, so it is not included in the estimates shown in table 12
and figure 9.
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Considering all these uncertainties, average annual growth
rates of adjusted machinery investment and producer durables
output are quite close (see table 12 and figure 9).87 This
suggests that both measures are subject to similar rates of
disguised inflation, which we believe are unlikely to exceed the
upper limits proposed by Bergson. As mentioned above (in the
discussion of table 9), our estimates of output growth could be
overstated by as much as 1 to 2 percentage points per year for
civilian machinery, of which producer durables constitute about
85 percent. Thus domestic production could contribute an
overstatement of at most 2 percentage points annually to
disguised inflation in the entire machinery component of
investment. If imports are not deflated, the annual growth of
machinery investment could be exaggerated by another percentage
point during the 1970s, for which Our import price indexes seem
fairly reliable. We know very little about changes in the prices
of machinery imports in other years, but inflation rates probably
were much slower.
Our estimates of total investment growth, therefore, are
likely to refleat disguised inflation in the machinery component,
but not in the construction component. We tentatively accept
Bergson's figure of 3 percentage points per year as an upper
limit on overstatement of the growth of machinery investment
during the late 1970$. The impact of disguised inflation may
have been similar in the 1980s, but it probably was smaller in
87These estimates update the results cited by Bergson, which were
first presented in USSR: Measures, pp. 203-207.
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Table 12
USSR: Comparison of Growth of Adjusted Machinery Investment
and Producer Durables Output, 1951-87a
Average Annual Rates
Adjusted Machinery Investment
Producer
Durables
Output
Investment Plus Exports Minus:
Deflated Current-Price
Imports Imports
1951-55
9.0
10.8
11.4
1956-60
13.9
13.3
12.5
1961-65
10.4
9.9
9.1
1966-70
8.2
8.0
7.2
1971-75
7.6
6.6
8.9
1976-80
6.6
5.4
4.3
1981-85
3.4
1.4
3.2
1986-87
5.9
5.5
2.7
1951-87
8.3
7.7
7.7
1966-87
6.4
5.3
5.6
aSee text for discussion of derivation of estimates.
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earlier periods. Machinery constitutes about 40 percent of total
investment in the base year, so taking 40 percent of 3 percentage
points suggests that the upward bias in total investment growth,
at its peak, may be slightly over 1 percentage point per year.88
Whatever its impact on our estimates, disguised inflation
almost certainly affects official Soviet investment statistics to
a greater extent. This implies an exaggeration of official data
on capital growth, which we use in adjusting GNP to factor cost.
The likely result is an overstatement of the capital stocks--and
the GNP shares--of sectors with newer, faster-growing equipment
relative to those of sectors with older, slower-growing
equipment."
Base-Year Weights
The factor cost adjustment provides better weights for
measuring changes in the Soviet economy's potential to produce
goods and services than do established prices. There are some
problems, however, in estimating the contributions of labor and
capital to base-year GNP by sector of origin, and, as indicated
above, we have not yet developed estimates of the contribution of
land and other natural resources.
88In this calculation, we assume that the machinery and
construction components of capital repair are subject to the same
degree of disguised inflation as the respective components of new
investment. Machinery comprises about 40 percent of investment
regardless of whether capital repair is included or excluded.
89Inflation in the growth of capital inputs undoubtedly results
also in some understatement of the growth of capital
productivity. Productivity estimates, however, are outside the
scope of this paper.
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Labor Income. Base-year estimates of labor income in
established prices are considered quite reliable; data on wage
rates and employment are obtained directly from official Soviet
sources for most sectors of origin. For the reasons discussed
earlier, moreover, incomes in established prices (except for
military pay) do not need to be adjusted to factor cost.
But incomes from private economic activity are probably
underestimated in some sectors, such as agriculture and various
consumer services. For example, Treml has claimed that household
purchases of food from collective farm markets in urban areas
exceed our estimates by substantial amounts." If correct, this
claim implies that household incomes, which must equal outlays,
exceed our estimates as well. Further investigation is required,
however, because the claim is based on a survey of emigres who
were atypical of the Soviet population and who had to rely on
their memories of past purchases. Treml also maintains that
incomes from privately provided services are higher than we have
estimated.91 So far, the Soviets have published very little
information about the valuation and coverage of the data on which
his estimates of services are based.
905ee "Purchases of Food From Private Sources in Soviet Urban
Areas," Berkeley-Duke Occasional Papers on the Second Economy in
the USSR (Paper No. 3, September 1985).
915ee "Income From Private Sources Recognized by Official Soviet
Statistics," Berkeley-Duke Occasional Papers on the Second
Economy in the USSR (Paper No. 11, December 1987).
73
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Returns on Capital and Land. As part of the factor cost
adjustment, returns on capital are estimated from official Soviet
data on stocks of fixed and working capital and an assumed rate
of return. We believe that these returns measure capital's
contribution to GNP better than the incomes removed from value
added in established prices--indirect taxes, subsidies, and
reported profits. Still, the estimates are subject to
uncertainty on several counts. The valuation of fixed capital--
taken from official data on stocks in comparable 1973 prices--is
not adjusted for the effects of actual price changes or of
disguised inflation between 1973 and 1982.92
In the absence of data on the results of actual investment,
moreover, the assumed rate of return--12 percent--is based on
Soviet guidelines for planning investment projects. Nonetheless,
this rate seems reasonable in that it is fairly close to rates of
return implied by studies of US productivity. Rates of 8 to 12
percent can be calculated from the work of Dale Jorgenson and his
associates on the 1948-79 period, and a rate of 11 percent on
capital excluding housing is indicated by Edward Denison's
research on the late 1950s.93
92
Neither, as mentioned in footnote 35, is there an adjustment
for divergences of the 1982 prices of investment goods that go
into capital stock from 1982 factor cost.
935ee Dale Jorgenson, Frank Gollop, and Barbara Fraumeni,
Productivity and U.S. Economic Growth (Cambridge, Mass.: Harvard
University Press, 1987), p. 268; and Edward F. Denison, assisted
by Jean-Pierre Poullier, Why Growth Rates Differ (Washington:
Brookings Institution, 1967), p. 142. For this comparison, we
adjust the returns estimated by Jorgenson et al. to exclude
depreciation, which has been roughly 3 percent of net capital
stock.
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Judith Thornton has argued, however, that our factor cost
adjustment procedure should be revised to substitute reported
profits for calculated returns on capital. That is, she agrees
that indirect taxes and subsidies should be removed but believes
that established prices excluding these elements reflect the
values planners attach to output better than adjusted factor
costs do.94 Her argument implies that current price-setting
practices provide adequate returns on capital, in part by
allowances for profits that include capital charges. This may be
the case for some branches of industry--as suggested by the
econometric evidence she cites--but profits in much of the rest
of the economy--notably agriculture and services--are
artificially low or nonexistent.
In any case, the base-year distribution of GNP by sector of
origin changes very little with variations in the rate of return
on capital. Adopting Thornton's recommendations for valuing GNP
would affect the distribution somewhat more but still would not
alter it greatly (see table 13).
At present, we do not estimate returns on land, but William
Liefert has developed estimates of rents on agricultural land and
on fuel and metal resources that provide some useful
94Thornton's recommendation amounts to calculating "ruble factor
cost" as Bergson did before sufficient capital data were
available to estimate "adjusted factor cost." She does not
specify, however, whether she believes planners' valuations
reflect the production potential of the economy--as the adjusted
factor cost standard is intended to do--or the preferences of
consumers or planners--as a welfare standard should. See
"Twenty-Five Years of Soviet National Income Accounting: From
Adjusted Factor Cost to Ultra-Adjusted Factor Cost," ACES
Bulletin (Fall 1983): pp. 53-67.
75
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Table 13
USSR: Distribution of 1982 GNP by Sector of Origin With
Alternative Rates of Return on Capital and Land
Present Returns on Capital Returns on Lard
Estimates 8%a 20%a Reported 5%1J 10%u
Profits
Total GNP 100.0 100.0 100.0 100.0 100.0
Industry 32.4 31.9 33.1 39.2 32.0
Construction 7.8 7.9 7.7 8.1 7.4
Agriculture 20.6 21.0 20.0 17.7 22.1
Transportation 9.5 9.4 9.7 10.2 9.1
Communications 0.9 0.9 0.9 1.2 0.8
Trade 6.5 6.0 7.2 6.0 6.2
Services 20.1 20.4 19.7 15.4 20.4
Military personnel 1.9 2.1 1.6 1.7 1.8
Other branches 0.3 0.3 0.2 0.5 0.2
aPercent of capital stock, net of depreciation.
100.0
31.6
7.0
23.6
8.6
0.8
5.8
20.6
1.7
0.2
bPercent of GNP at factor cost, allocated arbitrarily to industry (20
percent to fuel and 5 percent to metals), agriculture (50 percent),
and services (25 percent to housing).
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information." We can roughly gauge the effects of allowing for
rents by assuming hypothetical values of returns on land--5
percent and 10 percent of GNP at factor cost--and arbitrarily
allocating these values among industry (fuel and metals),
agriculture, and services (housing). The effects of these
assumptions on the base-year distribution of GNP by sector of
origin are not large (table 13).
Net Impact of Errors on Total GNP Growth
Overall, we believe that our estimates of total GNP growth
are not far from the mark. Growth is subject to sources of both
overestimation and underestimation, so errors in opposite
directions offset each other to some extent. To evaluate the
reliability of these growth estimates, we compare them below with
official and unofficial Soviet figures and then examine the
results of rough sensitivity tests of the effects of errors in
estimates of various GNP components.
Comparisons With Soviet Estimates. The Soviets publish two
official measures--called national income produced and national
income used--which are often referred to collectively as net
material product (NMP) by Western economists. These measures
differ from GNP in definition and coverage by excluding
depreciation (the "gross" element of GNP) and services that do
955ee "The Share of Agriculture in Soviet GNP: 1970-85," CPE
Agriculture Report (November-December 1988): pp. 22-26.
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not contribute directly to material output." The growth of both
national income produced and national income used consistently
exceeds GNP growth (see table 14), largely because of disguised
inflation arising from Soviet procedures for establishing
comparable prices for new products.97
The growing stream of Soviet criticism of official
statistics noted above has yielded some unofficial calculations
of NMP growth that are well below officially reported rates. In
pioneering studies published in the late 1960s, average growth
rates of national income produced were estimated at 6.5 to 7
percent per year between 1950 and about 1965--compared with our
estimate of about 6 percent and an official rate of 9 percent."
More recently, the most comprehensive estimates are Selyunin and
Khanin's for national income-produced. In addition, Abel
96Although NMP excludes the value added of nonmaterial services,
it does include the value of material inputs used in their
production.
97The value of national income produced in current prices exceeds
that of national income used by the sum of losses of output
produced but not distributed to final purchasers and net gains or
losses of foreign exchange (converted to domestic rubles). See
Treml and Kostinsky, Domestic Value of Soviet Foreign Trade, pp.
7-11. Growth rates of these two national income measures in
comparable prices also differ, apparently because of
inconsistencies in the procedures used to convert current prices
to comparable prices. See Thomas A. Wolf, "Foreign Trade and
National Income Statistics in the Soviet Union: A Comment,"
Soviet Studies (January 1987): pp. 122-128, and "A Further Note
on Foreign Trade and National Income Statistics in the Soviet
Union," Soviet Studies (April 1988): pp. 320-325.
9
8Soviet estimates by Boris Mikhalevskiy and Yuriy Sokolov are
discussed in Frederick G. Denton, "A Recent Soviet Study of
Economic Growth 1951-63," Soviet Studies (April 1968): pp. 501-
509. A major Soviet study published after Denton's article is
A.L. Vaynshteyn, Narodnyy dokhod Rossii i SSSR (The National
Income of Russia and the USSR) (Moscow: Nauka, 1969).
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Table 14
USSR: Comparison of CIA Estimates of Overall Growth With
Official and Unofficial Soviet Estimates, 1961-87
Average Annual Rates
CIA Estimates National Income Produced National Income Used
GNPa NMP'
Officialc Selyunin., Officiale
& Khaninu
Agan-
begyanf
1951-60
5.1
6.7
10.3
7.2
NA
NA
1961-65
4.8
4.9
6.5
4.4
5.7
NA
1966-70
4.9
5.2
7.8
4.1
7.1
5.5
1971-75
3.1
3.3
5.7
3.2
5.2
3.9
1976-80
2.1
2.0
4.3
1.0
3.9
2.1
1981-85
1.9
1.7
3.6
0.6
3.1
0.3
1986-87
2.7
2.4
3.2
2.0
NA
NA
1951-85
3.8
4.3
6.9
3.9
NA
NA
1966-85
3.0
3.1
5.3
2.2
4.8
2.9
aBased on value added at 1982
factor cost.
bGNP excluding services that do not contribute directly
to material
output; based on value added in 1982 established prices.
cSee Narodnoye khozyaystvo SSSR v 1987 q. (Moscow: Finansy i
statistika, 1988), p. 7; and A.L. Vaynshteyn, Narodnyy dokhod Rossii i
SSSR (Moscow: Nauka, 1969), p. 110.
dSee Grigoriy Khanin, "Ekonomicheskiy rost: al'ternativnaya otsenka,"
Kommunist (No. 17, 1988): p. 85; and Vasiliy Selyunin and Khanin,
"Lukavaya tsifra," Novyy mir (No. 2, 1987): pp. 194-195.
eSee A.G. Aganbegyan, "Programma korennoy perestroyki," Ekonomika i
organizatsiya promyshlennogo proizvodstva (No. 11, 1987): pp. 6-7.
fSee Abel Aganbegyan, The Economic Challenge of Perestroika
(Bloomington, Ind.: Indiana University Press, 1988), p. 2 (graph).
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Aganbegyan, a prominent economic adviser to Gorbachev, has
offered alternative estimates of the growth of national income
used.
These unofficial Soviet growth rates for NMP are
consistently closer to our estimates than to official Soviet
statistics (table 14). It is not surprising that Selyunin and
Khanin's figures are lower than ours because they appear to be
based on quantity data to a greater extent.99 The derivation of
Aganbegyan's figures is unclear, except that he says they reflect
"more realistic" price deflators than official statistics do.100
Results of Sensitivity Tests. As mentioned earlier, our
confidence in estimates of the growth of total GNP depends on
both the reliability of growth estimates for the individual
sectors of origin and the accuracy of the base-year weights of
these sectors. Potential biases in sectoral growth rates have
been assessed by James Noren, who found little net impact on
total GNP growth.101 Following his approach--but varying the
specific assumptions somewhat--we can identify selected branches
99Selyunin and Khanin's methods of estimating national income
growth are discussed in Khanin, "Puti sovershentvovaniya
informatsionnogo obespecheniya," pp. 63-64; and summarized in
Ericson, "The Soviet Statistical Debate," p. 29.
10 ?The Economic Challenge of Perestroika (Bloomington, Ind.:
Indiana University Press, 1988), p. 2.
101See "The New Look at Soviet Statistics: Implications for CIA
Measures of the USSR's Economic Growth," in CIA Conference
Report, The Impact of Gorbachev's Policies on Soviet Economic
Statistics (SOV 88-10049, July 1988), pp. 69-81. Noren's
findings are also discussed in CIA, Revisiting Soviet Economic
Performance Under Glasnost: Implications for CIA Estimates (SOV
88-10068, September 1988), pp. 16-18.
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of industry and services as the principal sources of bias in
growth estimates:
o Some understatement of growth--by up to 1 percentage point
per year--in industrial branches where samples are
dominated by quantity data--primarily chemicals,
construction materials, and metals.
o An overstatement of machinery growth--where the sample
includes a large share of Soviet value data--by 1 to 1.5
percentage points per year.
o A downward bias of 1 to 3 percentage points per year in the
growth of housing, which is based on living space.
o Downward biases of 1 to 2 percentage points per year in the
growth of those consumer and government services for which
estimates are based on labor inputs.
The impact of these biases on total GNP growth is evaluated
roughly by first adjusting estimates of average annual growth by
sector of origin in 1951-87 to allow for the degrees of
understatement or overstatement (in percentage points) shown in
table 15. The adjusted estimates of growth for each sector are
then weighted by the sector's share of GNP at factor cost, and
adjusted growth rates of total GNP are calculated.102 For
102Our calculation of the minimum (or maximum) degree of bias (in
percentage points) in total GNP growth is based on the minimum
(or maximum) degree of bias regardless of sign in the growth of
each sector. For example, a minimum bias of +1 percentage point
per year in the growth of machinery is combined with a minimum
bias of -1 percentage point, rather than -3 percentage points, in
the growth of housing. If the minimum (or maximum) degrees of
sectoral bias including signs were used in the calculation, the
range of bias in estimates of total GNP growth would widen, but
its midpoint would remain close to zero.
79
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Table 15
USSR: Sensitivity Tests of Potential Bias in
Estimates of GNP Growth
Average Annual Rates (Except Shares)
Total GNP
Industry
Ferrous metals
Nonferrous metals
Fuel
Electric power
Machinery
Chemicals
Wood, pulp, & paper
Construction materials
Light industry
Food industry
Other industry
Construction
Agriculture
Transportation
Communications
Trade
Services
Housing
Utilities
Repair & personal care
Recreation
Education
Health
Science
Credit & insurance
Govt administration
Military personnel
Other branches
Weight
(Share of
1982 GNP)
Growth
Estimate
1951-87
Assessment
Minimum
(Percentage
of Bias
Maximum
Points)
100.0
3.8
-0.1
-0.3
32.4
5.5
+0.2
+0.3
1.9
5.2
-0.5
-1.0
1.3
6.0
-0.5
-1.0
3.1
5.5
OK
OK
2.3
8.1
OK
OK
11.4
5.6
+0.8
+1.5,
2.4
7.8
-0.3
-0.9
1.9
3.2
-0.2
-0.5
1.9
7.0
-0.3
-0.9
2.2
4.3
+0.1
+0.4
2.6
5.1
-0.1
-0.2
1.3
5.5
NA
NA
7.8
5.7
OK
OK
20.6
1.7
OK
OK
9.5
7.3
OK
OK
0.9
6.6
OK
OK
6.5
5.4
OK
OK
20.1
3.3
-0.7
-1.7
5.5
3.1
-1.0
-3.0
1.3
6.0
-1.0
-3.0
1.6
5.1
+0.5
+1.0
1.0
4.9
-0.5
-1.0
3.9
3.0
-1.0
-2.0
2.1
3.1
-1.0
-2.0
2.2
6.2
OK
OK
0.3
2.0
-1.0
-2.0
2.2
1.2
-0.5
-1.0
1.9
0.8
OK
OK
0.3
3.8
NA
NA
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Basis for Assessments of Minimum and Maximum Biasa
Total GNP: Weighted average of biases in component sectors shown.
Industry:
Total industry: Weighted average of biases in component sectors
shown.
Ferrous metals, nonferrous metals: Maximum bias assumed to be -1
percentage point, following Noren. Minimum taken as half of
maximum.
Fuels, electric power: Bias assumed negligible, on basis of
table 8 (above).
Machinery: Weighted average of biases in component sectors, as
follows:
Automobiles, transportation machinery, military machinery:
Bias assumed negligible, following Noren.
Other sectors with samples based on quantity data: Minimum
bias assumed to be -1 percentage point, maximum -3
percentage points. Midpoint matches Noren's assumption (-2
percentage points) for miscellaneous industrial sectors
with samples of this kind.
Sectors with samples based on value data: Maximum bias taken
as difference between Treml and CIA estimates of average
annual growth during 1965-86. Minimum assumed to be half
of maximum.
Chemicals: Weighted average of biases in component sectors, as
follows:
Basic chemicals, organic synthetic products, paints and
lacquers: Bias assumed negligible, following Noren.
Other sectors with samples based on quantity data: Minimum
and maximum biases assumed to be -1 and -3 percentage
points, respectively, as for machinery sectors with samples
of this kind.
Mineral chemicals (sample based on value data): Maximum bias
assumed to be +1 percentage point, following Noren.
Minimum taken as half of maximum.
aExcept for minor updates and revisions, these assessments are
based on James Noren, "The New Look at Soviet Statistics:
Implications for CIA Measures of the USSR's Economic Growth," in
CIA Conference Report, The Impact of Gorbachev's Policies on Soviet
Economic Statistics (SOV 88-10049, July 1988), pp. 69-81.
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Wood, pulp, and paper: Weighted average of biases in component
sectors, as follows:
Logging, wood chemicals: Bias assumed negligible, following
Noren.
Other sectors with samples based on quantity data: Minimum
and maximum biases assumed to be -1 and -3 percentage
points, respectively, as for machinery sectors with samples
of this kind.
Furniture (sample based on value data): Minimum bias assumed
to be +1 percentage point, maximum +3 percentage points.
Midpoint matches Noren's assumption (+2 percentage points)
for miscellaneous industrial sectors with samples of this
kind.
Construction materials: Weighted average of biases in component
sectors, as follows:
Cement, concrete, roofing materials, other construction
materials: Bias assumed negligible, following Noren.
Other sectors with samples based on quantity data: Minimum
and maximum biases assumed to be -1 and -3 percentage
points, respectively, as for machinery sectors with samples
of this kind.
There are no construction materials sectors with samples
based on value data.
Light industry: Weighted average of biases in component sectors,
as follows:
Fabrics (cotton, silk, wool, linen): Bias assumed
negligible, following Noren.
Other sectors with samples based on quantity data: Minimum
and maximum biases assumed to be -1 and -3 percentage
points, respectively, as for machinery sectors with samples
of this kind.
Sewn goods (sample based on value data): Minimum and maximum
biases assumed to be +1 and +3 percentage points,
respectively, as for furniture.
Food industry: Weighted average of biases in component sectors,
as follows:
Confectionary products: Minimum and maximum biases assumed
to be -1 and -3 percentage points, respectively. Midpoint
matches Noren's assumption (-2 percentage points) for this
sector.
Other sectors with samples based on quantity data: Bias
assumed negligible, following Noren.
There are no food industry sectors with samples based on
value data.
Construction, agriculture, transportation, communications, trade:
Bias assumed negligible, following Noren.
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Services:
Total services: Weighted average of biases in component sectors
shown.
Housing: Maximum bias assumed to be -3 percentage points, on
basis of table 10 (above). Minimum assumed to be -1 percentage
point--slightly less than lower end of range suggested by table
10 because we consider alternative estimates for this sector
especially likely to be overstated.
Utilities: Minimum and maximum biases assumed to be
percentage points, respectively, as for industrial
samples based on quantity data.
Repair and personal care: Minimum and maximum biases
be +0.5 and +1 percentage point, respectively.
Recreation: Minimum and maximum biases assumed to be
percentage point, respectively.
-1 and -3
sectors with
assumed to
-0.5 and -1
Education, health: Minimum and maximum biases assumed to be -1
and -2 percentage points, respectively, on basis of table 10
(above).
Science: Bias assumed negligible.
Credit and insurance: Minimum and maximum biases assumed to be
-1 and -2 percentage points, respectively.
Government administration: Minimum and maximum biases assumed to
be -0.5 and -1 percentage point, respectively, on basis of
table 10 (above).
Military personnel: Bias assumed negligible, following Noren.
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purposes of this calculation, rates of sectoral growth that are
not believed to be biased in any particular direction--even
though some error is likely?are not adjusted. The resulting
impact on total GNP growth turns out to be no more than a few
tenths of a percentage point per year.
Estimates of base-year weights by sector of origin also are
subject to error, but the likely impact on total GNP growth is
minor. Alternative rates of return on capital and land (as in
table 13) would affect GNP growth by no more than one or two
tenths of a percentage point per year. The effects of another
potential source of error--underestimation of the weights of
private agriculture and services--cannot be evaluated, however,
without more information on the growth of these activities than
is presently available.
Avenues For Improvements in Estimates
Research is under way--inside and outside the CIA--that
could help us refine our estimates of Soviet GNP. The main focus
of CIA research is on the estimation of growth, especially for
key GNP components. Work is currently under way on:
o Updating our sample of industrial products, particularly
the machinery sample.
o Evaluating the results of internal and external research
on the impact of disguised inflation on estimates of the
growth of machinery investment and output.
o Studying potential methods of incorporating productivity
gains in our estimates of the growth of services.
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o Developing better estimates of the impact of foreign
trade on overall Soviet economic growth.103
Outside research could also contribute to better estimates
of base-year GNP. The work of Grossman and Treml on the second
economy is providing important information about the scope of
private activity in the late 19705, although data for estimating
the growth of such activity remain inadequate. On another front,
Liefert's research on returns on land includes information that
should be useful in our own efforts to estimate such returns.
103For the United States, the Department of Commerce estimates
the growth of the volume of goods and services over which the
country has "command" as a result of its current production, and
we hope to develop similar estimates for the USSR. The growth of
command differs from the growth of the usual, production-based
measure of GNP when the relationship between export prices and
import prices (the country's "terms of trade") changes. See
Edward F. Denison, "International Transactions in Measures of the
Nation's Production," Survey of Current Business (May 1981): pp.
17-28.
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GLASNOST, PERESTROYKA, AND SOVIET STATISTICS
Gorbachev's policies of glasnost and perestroyka are
beginning to affect both the statistical system in the USSR and
the operation of the Soviet economy more generally. Because the
State Committee for Statistics (Goskomstat) obtains much of its
information from enterprise reporting on plan fulfillment, new
economic incentives for workers and managers can influence the
basic data. Over the next few years, systemic changes are likely
to affect the comparability of measures of economic performance
in the USSR?Obtained either from our GNP estimates or from
official Soviet statistics--with past figures.
Some additional economic information is being published,
including new kinds of data bearing on current policies (see
inset). On the other hand, some traditional kinds of data--
especially on production in physical units--may stop appearing as
their importance for economic planning diminishes. Substantial
changes in the kinds of Soviet data available could require
modifications in some of our procedures for estimating GNP.
Without more information on how the new data are likely to differ
from the old, it is impossible to predict the impact of such
changes on the quality of our GNP estimates.
Another recent change in the statistical system is a
reinvigoration of efforts against falsification in- reporting
data. For example, there were 15,000 prosecutions for
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INSET
Changes in the Soviet Statistical System
Glasnost is prompting the release of some additional
economic statistics, including both the reappearance of data
previously withheld and the publication of new kinds of data
bearing on current economic policies.a For example, data on
grain and alcohol production have been restored to official
statistical yearbooks. Moreover, special statistical compendia
on subjects such as industry, agriculture, and labor--which have
not been issued since the early 1970s--began to be published in
late 1988. GOskomstat also has begun to issue press releases on
a wide range of topics, often with policy implications, including
the progress of the modernization drive, the health of the
population, and current economic performance.
Many of the data appearing as a result of glasnost are of
kinds seldom published, and perhaps not collected, in the past.
New data on services, for instance, are being used to illustrate
the effects of policies to encourage individual and cooperative
activities in that sector. Some additional value data in current
prices also are beginning to appear as greater emphasis is placed
on financial indicators of enterprise performance, like profits
and costs.
aFor a discussion of recent changes in the publication of data,
see Rose Ann McHenry, "Changes in the Availability of Economic
Data Under Gorbachev," in CIA Conference Report, The Impact of
Gorbachev's Policies on Soviet Economic Statistics (SOV 88-10049,
July 1988). For background on earlier publication policies, see
Michael Kaser, "The Publication of Soviet Statistics," in Treml
and Hardt, eds., Soviet Economic Statistics, chapter 3.
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Despite glasnost, far fewer economic statistics are
available for the USSR than for Western countries. In fact, the
amount of information included in the most recent official
statistical yearbooks probably remains below that released in the
early to mid-1970s, although it has increased in the last few
years. Data reflecting poorly on the USSR, moreover, are still
suppressed from time to time--as at the beginning of 1987, when
industrial performance suffered a variety of setbacks and a
number of the usual statistics on production were not released.
The application of perestroyka to the Soviet statistical
system is creating pressure on Goskomstat to reexamine the kinds
of data it collects and the measures of economic performance it
derives from those data.b Increased emphasis is to be placed on
gauging the effects of economic policies and on making related
indicators consistent with each other. Traditional gross output
statistics--which encourage the wasteful use of energy and raw
materials--are to be deemphasized. Instead, the focus is to turn
to measures of final uses of output and to income measures in key
sectors of origin. The distinction between final and
intermediate uses of output is to be refined, and estimates of
the linkages between production and use are to be improved. In
addition, economic comparisons of the USSR with other countries
are to be expanded, and estimates conforming to such Western
concepts as GNP are to be developed for use in these comparisons.
END INSET
bFor further discussion of the restructuring of the Soviet
statistical system, see Vladimir Treml, "Perestroyka and Soviet
Statistics," in CIA Conference Report, The Impact of Gorbachev's
Policies on Soviet Economic Statistics (SOV 88-10049, July 1988).
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"distortions of statistics" in 1987.1" If successful, this
anticorruption campaign is likely to reduce the extent of
exaggeration in production data and thus lower our estimates of
GNP growth over the next few years. On the other hand, pressure
to meet targets for traditional indicators like gross output--
combined with simultaneous requirements to implement sweeping
changes in the economic system--may increase the temptation for
enterprise managers to overstate production. Increasing
overstatement could boost growth artificially, if only for a
short time.
Besides its potential effects on the statistical system,
perestroyka is bringing more general changes in the Soviet
economy. Some of these changes are likely to affect our ability
to measure economic performance during the next few years:
o State inspection of the quality of industrial output--
introduced in January 1987--appears to have depressed
growth. If enforcement is not abandoned, this new
inspection system probably will result in a one-time
quality improvement that cannot be captured adequately,
either in our estimates of GNP growth or in official
Soviet statistics.
.c--
104Izvestiya (27 April 1988): p. 1.
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o Official encouragement of individual and cooperative
economic activities appears to be spurring the growth of
a number of consumer-oriented sectors. To the extent
that this growth reflects a shift from illegal,
unreported activities to legal, reported ones,
consumption growth will be exaggerated for a time.
o Recently strengthened incentives for innovation are
reported to be achieving some results. Because
innovation brings new products, whose pricing is a
primary source of disguised inflation, the extent of
overstatement in estimates of GNP growth--and especially
in official Soviet statistics--could increase. On the
other hand, the extent of overstatement could decrease if
the rate of genuine rather than token innovation rises.
o The authority to set prices is to be decentralized
gradually as part of the transition to self-financing.
If actual inflation accelerates as administrative
controls on prices weaken, the impact of disguised
inflation on our estimates of GNP growth, and on official
Soviet statistics, probably will increase temporarily.
The effects of all of these changes are likely to diminish as the
economy adjusts and disappear after a few years. During the
adjustment period, however, the interpretation of Soviet economic
growth will require special caution.
84
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4 August 1989
Appendix A
Trends in Soviet GNP, 1950-87
This appendix presents detailed tables of the CIA's latest
estimates of trends in real Soviet GNP during the 1950-87 period.
Unless otherwise specified, all estimates reflect 1982 factor cost
weights.
Tables appear in the following order:
A-1 USSR: GNP by Sector of Origin at 1982 Factor Cost
A-2 USSR: Average Annual Growth of GNP by Sector of Origin
A-3 USSR: Annual Growth of GNP by Sector of Origin
A-4 USSR: Indexes of GNP by Sector of Origin
A-5 USSR: Shares of GNP by Sector of Origin
A-6 USSR: GNP by End Use at 1982 Factor Cost
A-7 USSR: Average Annual Growth of GNP by End Use
A-8 USSR: Annual Growth of GNP by End Use
A-9 USSR: Indexes of GNP by End Use
A-10 USSR: Shares of GNP by End Use
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A-11 USSR: Consumption in 1982 Established Prices
A-12 USSR: Average Annual Growth of Consumption in 1982
Established Prices
A-13 USSR: Consumption Per Capita in 1982 Established
Prices
A-14 USSR: Average Annual Growth of Consumption Per Capita
in 1982 Established Prices
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Table A-1 Billion Rubles
USSR: GNP by Sector of Origin at 1982 Factor Cost
1950 ? ? ? 1987
Industry
Ferrous metals
Nonferrous metals
Fuel
Electric power
Machinery
Chemicals
Wood, pulp, and paper
Construction materials
Light industry
Food industry
Other industry
Construction
Agriculture
Transportation
Freight
Passenger
Communications
Trade
Services
Consumer services
Housing
Utilities
Repair and personal care
Recreation
Education
Health
Science
Credit and insurance
Government administration
General agricultural
programs
Forestry
State administration
Culture
Municipal services
Civilian police
Military personnel
Other branches
Gross national product
GNP in established prices
3
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Table A-6
USSR: GNP by End Use at 1982 Factor Cost
1950
Consumption
Consumer goods
Food
Animal products
Processed foods
Basic foods
Beverages
Soft goods
Durables
Consumer services
Housing
Utilities
Transportation
Communications
Repair and personal care
Recreation
Education
Health
Investment
New fixed investment
Machinery and equipment
Construction and other
capital outlays
Net additions to livestock
Capital repair
Repair of machinery
Repair of structures
Other government expenditures
Government administration
General agricultural
programs
Forestry
State administration
Culture
Municipal services
Civilian police
Research and development
Outlays not elsewhere
classified
Gross national product
GNP in established prices
4
? ? ?
Billion Rubles
1987
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Table A-11
USSR: Consumption in 1982 Established Prices
1950
Consumption
Consumer goods
Food
Animal products
Processed foods
Basic foods
Beverages
Soft goods
Durables
Consumer services
Housing
Utilities
Transportation
Communications
Repair and personal care
Recreation
Education
Health
Gross national product
Population (million persons)
5
? ? ?
Billion Rubles
1987
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Appendix B
Soviet GNP in Established Prices, 1982
This appendix documents the CIA's estimates of Soviet GNP in
established prices in 1982--the base year for our estimates of
GNP growth. The derivation of these estimates is described in
the notes to the tables.
Tables appear in the following order:
B-1 USSR: Household Incomes, 1982
B-2 USSR: Household Outlays, 1982
B-3 USSR: Public Sector Incomes, 1982
B-4 USSR: Public Sector Outlays, 1982
B-5 USSR: GNP by Type of Income, 1982
B-6 USSR: GNP by End Use, 1982
The following abbreviated citations are used in the
documentation:
Abbreviated Citation Full Citation
GNP 1970
CIA Research Aid, USSR: Gross National
Product Accounts, 1970 (A(ER) 75-76,
November 1975)
Gosbyudzhet 19-- Gosudarstvennyv byudzhet SSSR: 19--
(Moscow: Finansy i statistika, 19--)
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Narkhoz 19-- Narodnoye khozyaystvo SSSR v 19-- g.
(Moscow: Finansy i statistika, 19--)
Personal Incomes CIA, USSR: Estimates of Personal Incomes
and Savings (SOV 89-10035, April 1989)
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Table B-1
USSR: Household Incomes, 1982
Billion Rubles
1. State wages and salaries 245.021
2. Net income of households from agriculture 61.876
a. Money wage payments by collective farms 21.232
(1) Payments to collective farm members 19.500
(2) Payments to hired workers 1.732
b. Net income from sales of farm products 17.420
c. Net farm income in kind 23.225
(1) Consumption in kind 22.378
(2) Investment in kind 0.847
3. Income of the armed forces 10.100
a. Military pay and allowances 6.590
b. Military subsistence 3.510
4. Other money income currently earned and
statistical discrepancy 14.753
a. Private money income currently earned 7.816
(1) Private earnings in construction 0.277
(2) Private earnings in services 7.539
(a) Housing repair 0.757
(b) Repair and personal care 4.019
(c) Room rentals 1.247
(d) Education 1.092
(e) Health 0.424
b. Unidentified money income and statistical
discrepancy 6.937
5. Imputed net rent 2.199
6. Imputed value of owner-supplied
construction services 0.554
7. Total income currently earned 334.503
8. Transfer receipts 58.185
a. Pensions and allowances 49.700
b. Stipends 2.500
c. Interest payments to households 5.671
d. Net new bank loans to households, 0.271
e. Profits distributed to consumer
cooperative members 0.043
9. Total income 392.688
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Sources for Table B-1
1. State wages and salaries
These are from Narkhoz 1983, pp. 385, 393.
2. Net income of households from agriculture
a. Money wage payments by collective farms
(1) Payments to collective farm members are from Vestnik
statistiki (No. 7, 1986): p. 54.
(2) Payments to hired workers. As in GNP 1970, P. 23, it
is assumed that 83.3 percent of the reported total number of
hired workers in agriculture (1.4 million--Narkhoz 1982, p. 287)
worked on collective farms and that they were paid at the
implicit annual wage rate for collective farmers (1488 rubles--
Narkhoz 1985, p. 277, and Vestnik statistiki (No. 7, 1986): P.
54).
b. Net income from sales of farm products is from Personal
Incomes, p. 11.
c. Net farm income in kind
(1) Consumption in kind is derived from estimates in
worksheets, as described in GNP 1970, appendix A.
(2) Investment in kind, the value of net additions to
private livestock inventories, is estimated on the basis of
changes in the number of cattle, hogs, sheep and goats, and
poultry and the estimated average realized price per head for
each animal. The calculation is presented below.
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Valuation of Net Additions to Private-Sector
Livestock Inventories, 1982
Number of Animals
Net Additions to
Livestock Inventories
End 1981 End 1982
Million Head
Million
Head
Rubles Per
Head
Billion
Rubles
Cattle
23.4
24.2
0.8
567
0.454
Hogs
14.2
15.8
1.6
189
0.302
Sheep and
goats
30.7
31.9
1.2
38
0.046
Poultry
325.9
337.1
11.3
4
0.045
Total
??? OM
??? MO
4.11. OM
0.847
All quantity data are from Narkhoz 1982, p. 241, and Narkhoz
1981, p. 271, except poultry, which are from Narkhoz 1985, pp.
239-241. Poultry inventories are allocated between the public
and private sectors on the basis of their shares in egg
production.
3. Income of the armed forces
a. Military pay and allowances are a CIA estimate.
b. Military subsistence is a CIA estimate.
4. Other money income currently earned and statistical
discrepancy
a. Private money income currently earned
(1) Private earnings in construction (0.277 billion rubles)
are based on total expenditures for construction of private
housing (1.736 billion rubles--sum of data for republics from
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Narkhoz 1982, P. 345) and assumptions about the distribution of
those expenditures.
Private housing is constructed by state organizations and by
private groups. The value of state-provided construction and
repair of private housing in 1982 is given as 0.605 billion
rubles in Narkhoz 1982, P. 452; that value (assumed to be in
current prices) is doubled to take account of materials. The new
value is believed to include sales to enterprises, as do the
reported sales of other state-provided services. They probably
represent repairs done for enterprises without their own repair
crews. Sales to enterprises are estimated at 42 percent of the
state-provided services (0.508 billion rubles) on the basis of
notional extrapolation of data published in V.I. Dmitriyev,
Metodologicheskiye osnovy prognozirovaniya sbrosa na bytovyye
uslugi, (Moscow: Legkaya industriya, 1975), p. 98. The remainder
(0.702 billion rubles) are sales to households. It is
arbitrarily assumed that these sales are divided equally between
new construction and repair services. The resulting distribution
is as follows:
Billion Rubles
Total sales
1.210
Sales to enterprises
0.508
Sales to households
0.702
Housing repair
0.351
New construction
0.351
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Privately provided construction of private housing is
calculated as total construction of such housing (1.736 billion
rubles) less state-provided construction (0.351 billion rubles),
or 1.385 billion rubles. Of this amount, 60 percent is assumed
to be labor payments (0.831 billion rubles) and 40 percent
materials (0.554 billion rubles). The labor payments are further
assumed to be one-third hired labor (0.277 billion rubles) and
two-thirds owner-supplied construction services (0.554 billion
rubles).
(2) Private earnings in services
(a) Private housing repair earnings (0.757 billion
rubles) are estimated as total expenditures on housing repair
less purchases of state-provided services and of materials used
in privately provided repair services. Household expenditures
for housing repair are estimated at 1.883 billion rubles in the
derivation of table B-2, item 2, a. Purchases from state
enterprises are estimated above in item 4, a, (1) at 0.351
billion rubles, which implies that purchases of privately
supplied housing repair services are 1.532 billion rubles. Of
this amount, expenditures for materials are estimated below at
0.775 billion rubles.
The material expenditures of 0.775 billion rubles are
determined as total retail sales of construction materials to
households (2.031 billion rubles, derived in table B-2, item 1,
a, as in GNP 1970, p. 39) less other uses of those materials.
Construction materials purchased by households are assumed to be
used for privately provided housing construction and for state-
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provided repair and construction of private housing, as well as
for privately provided housing repair. The materials used in
privately provided housing construction are estimated above in
item 4, a, (1) at 0.554 billion rubles. It is assumed that, as
with other services included in Soviet retail trade statistics,
the entire value of state-provided housing construction and
repair services (net of sales to enterprises) is included in the
listed purchases of construction materials. The residual retail
sales of construction materials to households are 0.775 billion
rubles:
Billion Rubles
Total retail sales of construction
materials to households. 2.031
Less:
Materials used in privately provided
new housing construction 0.554
Materials used in state-provided
repair and construction of
private housing 0.702
Equals:
Materials used in privately provided
housing repair 0.775
(b) Private repair and personal care earnings (4.019
billion rubles) are estimated at 90 percent of household
expenditures on these services. Expenditures (4.466 billion
rubles) are obtained by deducting expenditures on housing
construction and repair from private purveyors (estimated above)
from total privately provided "everyday" services (5.500 billion
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rubles, based on an estimated "5-6 billion rubles every year"
cited in Izvestia (19 August 1985)).
(c) Private room rental earnings (1.247 billion rubles)
are assumed to have risen during 1971-82 at the same rate as the
leisure component of the GNP index for recreation. The 1970
value (0.484 billion rubles) is from GNP 1970, P. 42.
(d) Private education earnings (1.092 billion rubles)
are equal to household expenditures for private educational
services, which are assumed to be 7 percent of the state wage
bill for education (from Narkhoz 1983, pp. 385-386, 393-394).
(e) Private health earnings (0.424 billion rubles) are
equal to household expenditures for private health services,
which are assumed to be 5 percent of the state wage bill for
health (excluding physical culture, from ibid.).
b. Unidentified money income and statistical discrepancy
This item is the difference between total income (item 9
below) and the sum of items 1; 2; 3; 4, a; 5; 6; and 8.
5. Imputed net rent
See the derivation of table B-2, item 2, a, (1).
6. Imputed value of owner-supplied construction services
See the derivation of item 4, a, (1) above.
7. Total income currently earned is the sum of items 1 through 6.
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8. Transfer receipts
a. Pensions and allowances are from Narkhoz 1985, p. 412.
b. Stipends are from ibid.
c. Interest income is the sum of interest on savings deposits
(3.741 billion rubles--calculated at 2.2 percent of average
annual deposits, from Narkhoz 1984, p. 462) and interest on state
loans (1.930 billion rubles--from Personal Incomes, p. 11).
d. Net new bank loans to households are from Narkhoz 1982, p.
526.
e. Profits distributed to consumer cooperative members are
from Personal Incomes, p. 11.
9. Total income is equal to total outlays from table B-2, item 8.
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Table B-2
USSR: Household Outlays, 1982
Billion Rubles
1. Retail sales of goods for consumption
a. State, cooperative, and commission sales
(1) Food
(2) Soft goods
(3) Durables
b. Collective farm ex-village market sales
(1) Food
(2) Soft goods
2. Consumer services
272.218
264.392
145.273
78.335
40.784
7.826
7.590
0.236
46.986
a. Housing
6.080
(1) Gross rent
4.913
(2) Repair
1.167
b. Other services
40.906
(1) Utilities
6.372
(2) Transportation
10.745
(3) Communications
2.725
(4) Repair and personal care
13.554
(5) Recreation
3.989
(6) Education
2.401
(7) Health
0.674
(8) Other
0.445
3. Consumption in kind
25.888
a. Farm consumption in kind
22.378
(1) Food
22.314
(2) Soft goods
0.064
b. Military subsistence
3.510
(1) Food
2.410
(2) Soft goods
1.100
4. Total outlays for consumption
345.092
5. Investment
2.583
a. Private housing construction
1.736
b. Farm investment in kind
0.847
6. Total outlays for consumption and investment
347.674
7. Transfer outlays
45.014
a. Net savings of households
13.329
b. Direct taxes
26.638
c. Other payments to the state
5.046
8. Total outlays
392.688
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Sources for Table B-2
1. Retail sales of goods for consumption
a. State, cooperative, and commission sales
Total sales to households of goods for consumption are
estimated in the following tabulation:
Billion Rubles
Total Food Soft Durables Other
Goods
Total state and
cooperative retail
sales, including,
commission salesl.
295.653
155.149
82.104
46.684
11.716
Less:
Sales to
institutions2
14.783
9.357
2.167
2.581
0.677
Producer goods
sold to farm
households'
0.967
0.967
Construction
materials sol4
to households'*
2.031
=IN,
.1M1,
2.031
Kerosene5
0.043
0.043
???????
IMO IMO
Film rentals6
0.237
=MI ?=1,
.111.11?
=WOW
0.237
Commission sales
and sales to
rental agencies7
5.000
=Dan.
1.000
4.000
Business trayel
expenditures?
0.518
0.518
- -
COMM*
11?11.
Services includRd
in retail sales
7.683
OW MO
5.762
1.921
Plus:
Unideptified retail
sales"
5.203
2.601
7.804
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Equals:
Sales to
households of
goods for
consumption
264.392 145.273 78.335 40.784
1Total state and cooperative retail sales distributed by category
of goods are given in Narkhoz 1984, pp. 483-485. Total sales of
food include the entire food category plus sales of tobacco
products.
Total identified sales of soft goods are derived from the
Narkhoz data as follows:
Billion Rubles
? Total retail sales of soft goods
82.104
Cloth
7.650
Clothing
28.581
Knitwear
14.652
Shoes
13.168
Laundry soap
0.206
Synthetic cleaning materials
0.910
Toilet soap and perfumes
3.458
Haberdashery
7.881
Matches
0.169
Kerosene ?0.043
Notebooks and paper
1.650
Publications ?
3.736
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Total identified sales of durables are derived from the
Narkhoz data as follows:
Billion Rubles
Total retail sales of durables
Furniture, carpets, and metal beds
46.684
12.060
Metal dishes
1.874
Glass dishes
2.287
Sporting goods
0.923
Radio goods
5.490
Musical instruments
0.375
Toys
1.482
Bicycles and motorbikes
1.946
Watches
1.250
Jewelry
3.509
Electrical goods
3.508
Sewing machines
0.174
Automobiles
10.693
Other household goods
1.113
Other and unidentified retail sales include window glass
(0.049 billion rubles), lumber, cement, and other construction
materials (2.528 billion rubles), and an unidentified residual
(9.139 billion rubles).
2Sales to institutions are estimated at 5.0 percent of total
retail trade--the share given in M.I. Bakanov, Ekonomicheskiy
analiz v torgovle (Moscow: Ekonomika, 1983), p. 51. The total
is distributed among groups of goods on the basis of their shares
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estinated for 1970 (from GNP 1970, pp. 61-62). These shares are
63.30 percent for food, 14.66 percent for soft goods, 17.46
percent for durables, and 4.58 percent for other goods.
3Producer goods sold to farm households are estimated at 5.55
percent (the share in 1970) of household income from sales of
farm products. The latter are estimated at 17.420 billion rubles
in table 1, item 2, b.
4Retail sales of construction materials (from Narkhoz 1984, pp.
484-485) are reduced by the share sold to institutions (21.2
percent, as in 1970).
5Retail sales of kerosene are from Narkhoz 1984, pp. 484-485.
8Film rentals are estimated by increasing the 1970 value by 21.6
percent, the increase in production of films during 1971-82
(Narkhoz 1984, p. 546).
7Commission sales are estimated at 5 billion rubles, allocated
roughly 80 percent to durables and 20 percent to soft goods. The
total and supporting information on distribution are given in
A.S. Khrenov, Regional'noye planirovaniye roznichnogo
tovarooborota (Moscow: Ekonomika, 1985), pp. 123-127.
8Business travel expenditures are arbitrarily estimated at 2
percent of total restaurant sales of 25.909 billion rubles
(Narkhoz 1984, p. 478).
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9Services to be deducted are estimated below from data in Narkhoz
1985, p. 492:
Billion Rubles
Total productive services
9.688
Shoe repair
0.805
Repair and tailoring of clothing
3.648
Processing expenses
1.824
Materials
1.824
Repair of knitwear
0.758
Processing expenses
0.379
Materials
0.379
Repair.of durables
2.404
Processing expenses
1.202
Materials
1.202
Furniture repair
0.330
Dry cleaning
0.198
Laundries
0.391
Photo services
0.379
Other productive services
0.775
Services sold to enterprises, estimated at 20.7 percent of
,
the above total, must be deducted because they are not counted in
retail trade data. (In 1982, such sales to enterprises made up
19.9 percent of total sales of services in Estonia, according to
Voprosy razvitiya obsluzhivaniya naseleniya (Tallinn: Akademiya
nauk Estonskoy SSR, 1985), pp. ??.) The revised total--7.683
billion rubles--is allocated 75 percent to soft goods and 25
percent to durables.
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1 ?Unidentified retail sales are allocated two-thirds to soft
goods and one-third to durables.
b. Collective farm ex-village market sales
Total purchases by households and enterprises in collective
farm markets are reported at 8.6 billion rubles in Narkhoz 1984,
p. 472. Purchases by enterprises and state institutions in these
markets are estimated at 0.744 billion rubles (9 percent of the
total--their share in 1970) and subtracted from the total to
obtain purchases by the population. Those purchases--7.826
billion rubles--are then allocated to food and soft goods, the
latter estimated as a residual. Food purchases by households and
enterprises combined (8.331 billion rubles) are derived on the
basis of the percentage of distribution of food purchases between
state trade and collective farm markets (Narkhoz 1984, pp. 476,
483). Enterprise purchases of food (estimated at 0.741 billion
rubles, or 95.7 percent of their total collective farm market
purchases--the share used for 1970) are subtracted from the
combined value. Household purchases of food therefore are 7.590
billion rubles and purchases of soft goods are 0.236 billion
rubles.
2. Consumer services
. a. Housing
The components of this item are derived below and regrouped
here to conform more closely with the accounting procedures of
the United States and the United Nations. According to those
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procedures, maintenance expenditures by owner-occupiers are part
of gross rent, while maintenance expenditures by tenants are
final expenditures but not part of gross rent. Regrouped
expenditures on housing consist of:
Billion Rubles
Total housing expenditures
Gross rent
Cash rent for urban public housing
Charges paid by members of housing
cooperatives for maintenance
Imputed net rent on urban private
and rural housing
Repair expenditures on urban private
and rural housing
Repair expenditures by tenants of
public housing
6.080
4.913
1.791
0.207
2.199
0.716
1.167
(1) Cash rent for urban public housing. Cash rent (1.791
billion rubles) is the product of the midyear stock of urban
public housing (1.167 billion square meters of living space) and
an average rental rate of 1.535 rubles per square meter per year.
The midyear stock is obtained from end-of-year stock data
(Narkhoz 1985, p. 426), converted from useful space to living
space with a coefficient of two-thirds. The average rental rate
is slightly higher than the 1.5 rubles used for 1976 in the CIA's
international comparison of consumption to allow for some
upgrading of quality. (See Gertrude E. Schroeder and Imogene
Edwards, Consumption in the USSR: An International Comparison,
prepared for Joint Economic Committee, Congress of the United
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States (Washington: US Government Printing Office, 1981), p.
104.)
(2) Charges paid by members of housing cooperatives for
maintenance. These charges (0.207 million rubles) are the
product of the midyear stock of housing (79.9 billion square
meters of living space) and a charge of 2.59 rubles per square
meter, as in 1970. The midyear stock is obtained by adding the
increase during 1971-82 (Narkhoz 1985, p. 420) to the stock
estimated for 1970.
(3) Imputed net rent on urban private and rural housing.
This value (2.199 billion rubles) is the product of the midyear
stock of such housing (1.433 billion square meters of living
space) and the average rental rate of state housing (1.535 rubles
per square meter, as above). The midyear stock of urban private
housing is estimated at 0.372 billion square meters and the rural
housing stock is estimated at 1.061 billion square meters of
living space (Narkhoz 1985, p. 426). Conversion rates from total
space to living space are those used for 1970.
(4) Repair expenditures. Repair expenditures by tenants of
urban public housing are estimated at 1.167 billion rubles, using
an annual outlay of 1 ruble per square meter of living space from
a Soviet source citing it as applicable to 1977 (Voprosy
ekonomiki (No. 7, 1979): p. 96). Repair expenditures on urban
private and rural housing are estimated at 0.716 billion rubles,
using an annual outlay of 0.5 rubles per square meter, and added
to imputed net rent to obtain gross rent.
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b. Other services
(1) Utilities. Expenditures are calculated by multiplying
their 1970 value by the utilities index from our estimates of GNP
by end use in 1970 established prices. No price changes are
known to have occurred for any of these utilities since 1970.
(2) Transportation. Outlays are calculated by multiplying
their 1970 value by the GNP end-use index for passenger
transportation in 1970 prices and adding an estimated price
increase of 12.3 percent. That increase allows for a reported
doubling of taxi fares in 1977, a reported 20 percent increase in
air fares in 1977, and an assumed rise of 20 percent in fares for
sea and river transportation (the actual size was not announced).
(3) Communications. Expenditures are calculated by
multiplying their 1975 value by the GNP end-use index for
communications in 1970 prices. No price changes are known to
have occurred.
(4) Repair and personal care. Total expenditures (13.554
billion rubles) are the sum of state-supplied services (9.089
billion rubles), derived in the table below, and privately
supplied services (4.466 billion rubles), estimated in the
derivation of table B-1, item 4, a, (2), (b).
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Billion Rubles
Total reported sales of everyday services
(from Narkhoz 1985, p.492) 8.779
Less:
Enterprise purchases of services (25 percent) 2.195
58 percent of sales of housing construction
and repair services 0.351
Plus:
93.6 percent of materials used in tailoring
and repair of clothing 1.707
93.6 percent of materials used in repair of
knitwear 0.355
66 percent of materials used in repair of
cars and appliances 0.793
Equals:
Sales of everyday services to households 9.089
(5) Recreation. Using data on the total value and
distribution of "paid services to the population" in 1985 (from
Narkhoz 1985, p. 488), the value of recreation expenditures in
1982 is estimated as follows:
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Billion Rubles
State-provided recreation services 4.342
Entertainment 1.740
Resorts and tourism 2.472
Physical culture 0.130
Less:
State subsidy 1.600
Plus:
Private room rentals 1.247
Equals:
Household outlays for recreation 3.989
The 1985 values for entertainment and for resorts and
tourism are moved back to 1982 using the respective components of
the GNP recreation index. The 1985 value for physical culture is
moved back using the change in budget expenditures (Gosbyudzhet
1981-85, p. 34). The subsidy to recreation is estimated in the
derivation of table B-3, item 7. It is probable that this
subsidy is included in the Narkhoz data on paid services (see
Planovoye khozyaystvo (No. 6, 1987): pp. 115-116). Private room
rentals are from table B-1, item 4, a, (2), (c).
(6) Education. Household outlays consist of payments for
private services (estimated in table B-1, item 4, a, (2), (d) at
1.092 billion rubles) and fees paid for public education, mainly
by parents of children in kindergarten (1.309 billion rubles).
The latter figure is estimated from a value including nursery
fees (1.350 billion rubles, from Vestnik statistiki (No. 1,
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1984): p. 75), less payments for nursery care by parents and
other sources (0.041 billion rubles, from Gosbyudzhet 1981-85, p.
61).
(7) Health. Household outlays are the sum of payments for
private services (estimated in table B-1, item 4, a, (2), (e) at
0.424 billion rubles) and fees paid for care of children in
nurseries and in fee-for-service clinics. The latter is
arbitrarily estimated at 0.250 billion rubles. (A 1985 value of
0.269 billion rubles can be estimated from the data on paid
services used in the derivation of item 2, b, (5) above.)
(8) Other services. This new category includes all
consumer services not explicitly covered in items 2, b, (1)-(7)
above. The estimate (0.445 billion rubles) is derived from a
1985 value based on the paid services data cited above; that
value is moved back to 1982 by the GNP index of consumption of
all household services.
3. Consumption in kind
a. Farm consumption in kind is from table B-1, item 2, c, (1).
(1) Food consumption is the difference between total
consumption and soft goods consumption.
(2) Soft goods consumption consists of wool consumption,
derived from estimates in worksheets, as described in GNP 1970,
appendix A.
b. Military subsistence is from table B-1, item 3, b. The
breakdown into food and soft goods is based on CIA estimates.
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4. Total outlays for consumption are the sum of items 1, 2, and
3.
5. Investment
a. Private housing construction is from Narkhoz 1982, P. 345
(the sum of data for republics).
b. Farm investment in kind is from table B-1, item 2, c, (2).
6. Total outlays for consumption and investment are the sum of
items 4 and 5.
7. Transfer outlays
a. Net savings (13.329 billion rubles) are the sum of (1) the
increment in savings deposits (8.619 billion rubles, calculated
from end-of-year totals in Narkhoz 1982, p. 414, and Narkhoz
1981, p. 450), (2) total state loans (1.000 billion rubles, from
Narkhoz 1983, p. 547), and (3) net insurance premia (estimated at
3.710 billion rubles in Personal Incomes, p. 11).
b. Direct taxes are from Gosbyudzhet 1981-85, P. 5.
c. Other payments to the state (5.046 billion rubles) are the
sum of estimates derived below of (1) trade union and other dues
(4.108 billion rubles), (2) net lottery ticket purchases (0.343
billion rubles), (3) taxes on land and buildings owned by
individuals and cooperatives (0.254 billion rubles), (4)
collective farm market fees paid by households (0.050 billion
rubles), and (5) other budget revenue from the population (0.292
billion rubles).
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Dues are estimated as the sum of trade union dues (2.791
billion rubles), Communist Party dues (0.720 billion rubles), and
other dues (0.597 billion rubles). Union and party dues are
estimated in Personal Incomes, p. 13; other dues are assumed to
have risen at the same rate as the sum of union and party dues
during 1971-82. Net lottery ticket purchases are derived as the
difference between "state internal prize loans and money-goods
lotteries" (1.343 billion rubles, from Gosbyudzhet 1981-85, p. 5)
and state loans (1.0 billion rubles, from Narkhoz 1983, p. 547).
Taxes on land and buildings owned by individuals and cooperatives
are given in Gosbyudzhet 1981-85, p. 65. Collective farm market
fees paid by households are from GNP 1970, pp. 23-24 (assumed to
be unchanged). Other budget revenue from the population is
derived as the difference between total budget revenues from the
population (28.577 billion rubles, from Gosbyudzhet 1981-85, p.
52) and the sum of (1) direct taxes from the population (26.638
billion rubles, from ibid.), (2) collective farm market fees paid
by households (0.050 billion rubles, from above), (3) taxes on
land and buildings owned by individuals and cooperatives (0.254
billion rubles, from above), and (4) lottery purchases and loans
from the population (1.343 billion rubles, from above).
8. Total outlays are the sum of items 6 and 7.
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Table 8-3
USSR: Public-Sector Incomes, 1982
Billion Rubles
1. Net income retained by organizations 17.032
a. Retained income of collective farms -2.371
b. Retained profits of state enterprises 17.482
c. Retained profits of consumer cooperatives 1.049
d. Retained profits of other organizations 0.871
2. Charges to economic enterprises for special
funds 36.003
a. Social insurance and social security 23.947
b. Education 0.758
c. Research 6.590
d. Social-cultural measures and sports
activities 0.300
e. Militarized guards 2.043
f. Support for administration of higher
echelons 2.364
3. Taxes and other payments to the budget 290.042
a. Tax on income of collective farms 0.756
b. Tax on income of consumer cooperatives 0.749
c. Tax on income of other organizations 0.373
d. Deductions from profits of state
enterprises 100.503
e. Turnover tax 107.864
f. Miscellaneous charges 79.798
4. Allowances for subsidized loses n.e.c. -54.526
5. Consolidated total charges against current
product, net of depreciation 288.551
6. Depreciation 90.685
7. Consolidated total charges against current
product 379.236
8. Transfer receipts 45.014
a. Net savings of households 13.329
b. Direct taxes 26.638
c. Other payments to the state 5.046
9. Consolidated net income 424.249
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Sources for Table B-3
1. Net income retained by organizations
a. Retained income of collective farms is calculated as
follows from estimates in worksheets:
Billion Rubles
Gross income
Less:
Payments to labor
21.788
21.780
Social security and insurance 1.598
Equals:
Net income (loss) -1.590
Less:
Income taxes 0.756
Other taxes
Equals:
Retained income (loss)
0.025
-2.371
b. Retained profits of state enterprises (17.478 billion
rubles) equal total profits (131.607 billion rubles--Narkhoz
1983, p. 536) less profits taxes (102.358 billion rubles--
Gosbyudzhet 1981-85, p. 5) and less bonuses paid from profits.
The latter (11.767 billion rubles) are calculated as follows (as
in GNP 1970, p. 45):
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"Reform" incentive
Billion Rubles, Except Percent
Value of Bonus Share Value of
Fund (Percent) Bonuses
funds
26.985
42.5
11.467
Fund for victory in
socialist competion
0.342
65
0.222
Fund for consumer
goods from waste
0.260
30
0.078
Total
11.767
The values of the funds from which bonuses are paid are from
Narkhoz 1985, p. 556. The shares of bonuses in these funds are
from Narkhoz 1985, p. 557, for reform incentive funds (bonuses
paid from the material incentive fund as a share of total reform
incentive funds in industry) and from GNP 1970, p. 45, for the
other two funds.
c. Retained profits of consumer cooperatives (1.049 billion
rubles) are the difference between net profits (2.139 billion
rubles--Narkhoz 1985, p. 536) and the sum of (1) income taxes
(0.749 billion rubles--35 percent of net profits), and (2) premia
paid to employees (0.341 billion rubles--taken at one-half of the
value given in Narkhoz 1985, p. 555).
d. Retained profits of other organizations. Income taxes paid
by other organizations (0.373 billion rubles) are equal to the
difference between total income taxes paid by consumer
cooperatives and social organizations (1.122 billion rubles--
Gosbyudzhet 1981-85, p. 5) and taxes paid by consumer
cooperatives only (0.749 billion rubles--ibid.). Since the tax
is levied at 25 to 35 percent of the total income of these
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organizations (V.V. Lavrov, L.P. Pavlova, and K.N. Plotnikov,
Gosudarstvennyy byudzhet (Moscow: Finansy i statistika, 1981),
p. 139), that income is 1.243 billion rubles (30 percent tax rate
assumed) and retained income is 0.870 billion rubles.
2. Charges to economic enterprises for special funds
a. Social insurance and social security. These charges
(23.947 billion rubles) are the sum of budget receipts from such
taxes (22.349 billion rubles, from Gosbyudzhet 1981-85, p. 5) and
contributions of collective farms to centralized social security
and insurance funds (1.598 billion rubles, calculated from
estimates in worksheets).
b. Education. These charges (0.758 billion rubles) are
estimated by raising the value for 1970 (0.400 billion rubles) by
the increase in budget expenditures on "preparation of cadres"
(Narkhoz 1983, p. 550).
c. Research. These charges (6.590 billion rubles) are
estimated at half the difference between total outlays on science
(24.9 billion rubles--Narkhoz 1985, p. 561) and budget outlays
(11.720 billion rubles--Gosbyudzhet 1981-85, p. 15).
d. Social-cultural measures and sport activities. These
charges (0.300 billion rubles) are estimated at 0.15 percent of
the total state wage bill less wages in education, health,
government administrative services, and part of science (the
latter taken at half of budget outlays on science net of
investment).
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e. Militarized guards. These charges (2.043 billion rubles)
are estimated at half the value of current outlays on civilian
police, from table B-4, item 2, d, (3).
f. Support for administration of higher echelons. These
charges (2.364 billion rubles) are estimated at 36.5 percent of
outlays on state administration. The share represents an
increase over that estimated for 1970 (30.8 percent) to allow for
a rising share in total employment of groups of employees that
are believed to be financed by charges to costs. Outlays on
state administration are assumed to be 91.5 percent (the share
used for 1970) of outlays on state administration and
administration of social organizations (from table B-4, item 2,
3. Taxes and other payments to the budget
a. Taxes on income of collective farms are derived in item 1,
a above.
b. Taxes on income of consumer cooperatives are derived in
item 1, c above.
c. Taxes on income of other organizations are derived in item
1, d above.
d. Deductions from profits of state enterprises. Reported
deductions from profits (102.358 billion rubles, from Gosbyudzhet
1981-85, p. 5) are reduced by one-half of net insurance premia
paid by households (1.855 billion rubles, from the derivation of
table B-2, item 7, a). This deduction is made to avoid double-
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counting the part of profits of the state insurance agency that
goes to the state budget.
e. Turnover tax. Net turnover tax is given as 100.602 billion
rubles in Gosbyudzhet 1981-85, p. 5. Gross turnover tax is
estimated at 107.864 billion rubles on the assumption that the
net tax is 93.27 percent of the gross tax, the average share that
prevailed in 1971-75, the last time such data were reported (in
Gosbyudzhet 1971-75, p. 14).
f. Miscellaneous charges. First, a "gross" budget residual is
calculated from data reported in Gosbyudzhet 1981-85, p. 5:
Billion Rubles
Total income from the socialist sector
Less:
Turnover taxes
Payments of state enterprises and
other economic organizations
from profits
Income taxes from kolkhozes, consumer
cooperatives, and social organizations
324.456
100.602
102.358
1.878
Social insurance 22.349
Equals:
"Gross" residual 97.270
Several other income items that are reported or can be
estimated with reasonable accuracy reduce this residual
substantially:
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Billion Rubles
Residual 97.270
Less:
Forestry incomel 0.797
Local fees from enterprises2 0.562
Rental income3 0.034
Income from the reductir of
administrative expenses 1.100
Republic budget surplus5 4.758
Increase in the supply of money6 1.400
Parents' fees for kindergartens
and nurseries7 1.350
Price markups op radio and
television sets? 0.444
Surcharges on spare pats for
agricultural machinery
Income from foreign tradel?
Geological prospecting charges11
Water usage fee12
Population-Raid fees for passes
to resorts1'
Amortization deductions14
Equals:
Revised residual
1Gosbyudzhet 1981-85, p. 5.
1.000
65.298
3.000
0.500
0.640
8.539
7.847
2Total local taxes and fees (1.159 billion rubles, from ibid., p.
65) less those paid by the population (0.597 billion rubles, from
the derivation of table B-2, item 7, c).
3Gosbyudzhet 1981-85, p. 65.
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4Plan figure, from Finansv SSSR (No. 1, 1982): p. 16.
5Gosbyudzhet 1981-85, p. 40.
6Estimate based on the 1971-82 increase in the population's
disposable money income (from Personal Incomes, p. 11) less the
addition to savings (from Narkhoz 1982, p. 414).
7Vestnik statistiki (No. 1, 1984): p. 75.
8Estimate from Jeanine Braithwaite, "The 1982 Seventeen Sector
Input-Output Table for the Soviet Union" (Center for
International Research, Soviet Branch Research Note, June 1987).
9Ibid.
1?Ibid.
llIbid.
12Estimate based on information in Planovoye khozvaystvo (No. 1,
1983): p. 124.
13These fees appear to be treated as budget income (see V.S.
Pavlov, Gosudarstvennyy byudzhet (Moscow: Finansy i statistika,
1985), p. 287). They are estimated at 40 percent of the subsidy
to recreation (1.600 billion rubles, from the derivation of item
4 below).
14 New evidence indicates that a significant share of
amortization deductions for replacement goes into the state
budget. One source gives the share at about 17 percent (V.I.
Bukato and M.A. Pesselya, Finansovo-kreditnyye problemy
intensifikatsii kapital'nogo stroitel'stva (Moscow: Finansy i
statistika, 1987), p. 136). Another source states that "the
bulk" of amortization deductions in the trade sector goes into
the budget (V.P. Boyken, Rezhim ekonomii v torgovle (Moscow:
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Ekonomika, 1986), P. 39). Amortization deductions are given in
Narkhoz 1985, p. 558.
The revised residual may include income from such sources as
customs duties, gross receipts of budget organizations,
miscellaneous levies and nontax revenues, unspent budget
allocations, fines, deductions for the road economy, and bank
loans to the budget equal to the increase in savings deposits of
the population. In the absence of information on the content of
the revised residual, we assume that 90 percent (7.062 billion
rubles) represents current income.
Total miscellaneous charges are then computed as the
unidentified current income just derived plus those items
enumerated in the derivation of the residual that represent
current income not elsewhere included in the GNP accounts:
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Billion Rubles
90 percent of revised
budget income residual 7.062
Plus:
Forestry income 0.797
Local fees from enterprises 0.562
Rental income 0.034
Income from the reduction of
administrative expenses 1.100
Price markups on radio and
television sets 0.444
Surcharges on spare parts for
agricultural machinery 1.000
Income from foreign trade 65.298
Geological prospecting charges 3.000
Water usage fee 0.500
Equals:
Miscellaneous charges 79.798
4. Allowances for subsidized losses n.e.c.
These consist of the following subsidies:
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Billion Rubles
Total subsidies
Price differences on purchases
of agricultural products by industry
Price differences on purchases of
industrial products by agriculture
54.526
29.900
8.200
Payments from gross turnover taxes 7.262
Payments from the budget to cover price
reductions in retail trade 0.700
Housing 4.847
Budget allocations to the press 0.187
Art and radio broadcasting 1.830
Recreation 1.600
The price differences on purchases of agricultural products
by industry are given in Finansy SSSR (No. 4, 1985): p. 5. Of
these, 1.7 billion rubles reflect subsidies on potatoes and
vegetables sold in retail trade, according to V.N. Semenov,
Prodovol'stvennaya programma i finansy (Moscow: Finansy i
statistika, 1985), p. 57. The price differences on purchases of
industrial products by agriculture are given in Semenov, p. 113.
Payments from gross turnover taxes are the difference between
gross and net turnover taxes (from item 3, e above). Subsidies
to retail trade are estimated as the average for 1974-75 given in
Finansy SSSR (No. 7, 1976): p. 8. No new data were found.
The subsidy to housing is estimated at 61.35 percent (as in
1970) of total state outlays on housing maintenance, including
depreciation charged to social consumption funds (7.9 billion
rubles--Narkhoz 1985, p. 412). Budget outlays on the press and
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on art and radio broadcasting are given in Narkhoz 1983, P. 550.
The subsidy to recreation is from Narkhoz 1985, p. 412
(calculated as the difference between total outlays on "social
security and social insurance" and the sum of "pensions" and
"aid").
5. Consolidated total charges against product, net of
depreciation, are the sum of items 1 through 4.
6. Depreciation
This is the sum of reported amortization charges by state
enterprises (83.931 billion rubles--Narkhoz 1985, p. 558) and by
collective farms (6.754 billion rubles--from estimates in
worksheets).
7. Consolidated charges against current product are the sum of
items 5 and 6.
8. Transfer receipts are from table B-2, item 7.
9. Consolidated net income is the sum of items 7 and 8.
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Table 8-4
USSR: Public-Sector Outlays, 1982
Billion Rubles
1. Communal services 36.284
a. Education 22.218
b. Health 13.919
c. Physical culture 0.147
2. Government administrative services 19.097
a. General agricultural programs 2.741
b. Forestry 1.150
c. State administration and administration
of social organizations 7.080
d. Municipal and related services 8.227
(1) Culture 2.661
(2) Municipal services 1.481
(3) Civilian police 4.085
3. Investment 228.671
a. Fixed capital investment 197.786
(1) New fixed investment 153.967
(a) Machinery and equipment 61.623
(b) Construction and other
capital outlays 91.664
(c) Net additions to livestock 0.681
(2) Capital repair 43.818
b. Inventory change 30.885
4. Research and development 20.234
5. Outlays n.e.c. 61.778
a. Net exports 6.754
b. Defense n.e.c., unidentified outlays,
and statistical discrepancy 55.024
6. Consolidated total value of goods and
services, exclusive of sales to households 366.064
7. Transfer outlays 58.185
a. Pensions and allowances 49.700
b. Stipends 2.500
c. Interest payments to households 5.671
d. Net new bank loans to households 0.271
e. Profits distributed to consumer
cooperative members 0.043
8. Consolidated total outlays 424.249
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Sources for Table B-4
1. Communal services
a. Education. Public-sector outlays on education (22.218
billion rubles) are the sum of wages (15.599 billion rubles),
social insurance (1.092 billion rubles), and other current
outlays (6.836 billion rubles), less parents' fees for education
(1.309 billion rubles, estimated in the derivation of table B-2,
item 2, b, (6)). Wages are the product of reported employment
(9.454 million persons--Narkhoz 1983, P. 386) and the average
wage rate (137.5 rubles per month--ibid., p. 394). Social
insurance is calculated as 7.0 percent of wages, the new rate
introduced in 1982. The method of estimating other current
outlays is set out in full in USSR: Measures, pp. 349-351. (The
value for 1982 is that calculated as described there in current
prices.)
b. Health. Public-sector outlays for health (13.919 billion
rubles) are the sum of wages (8.478 billion rubles), social
insurance (0.593 billion rubles), and other current outlays
(5.097 billion rubles), less household outlays on public health
services (0.250 billion rubles, estimated in the derivation of
table B-2, item 2, b, (7)). Total wages are estimated as the
total reported in union-republic budgets (Gosbyudzhet 1981-85, p.
59) divided by the ratio of union-republic budget outlays for
health to total state budget outlays for health (94.46 percent--
ibid., p. 33). Social insurance is calculated as 7.0 percent of
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wages, the new rate introduced in 1982. Other current outlays
are calculated (in current prices) as described in USSR:
Measures, pp. 351-352.
c. Physical culture. Public-sector outlays on physical
culture are 0.147 billion rubles, the sum of budgetary
expenditures (0.113 billion rubles--Narkhoz 1983, P. 550) and
other expenditures (0.034 billion rubles). The latter are
calculated on the assumption that their share in total public
outlays on physical culture is the same as reported for 1967 (23
percent--as cited in USSR: Measures, p. 138).
2. Government administrative services
a. General agricultural programs. This item is the sum of
wages (1.969 billion rubles), social insurance deductions (0.087
billion rubles), and other current outlays (0.685 billion
rubles). Wages are the product of employment (1.041 million
persons) and the average wage rate (157.6 rubles per month).
Employment is determined as the difference between total state
agricultural employment (12.019 million persons--Narkhoz 1983,
385) and employment at state farms and other state enterprises
(10.978 million persons--ibid.). The wage rate is calculated
from these data and those given in ibid., p. 393. Social
insurance deductions are derived as 4.4 percent of wages; the
rate did not change in 1982. Other current outlays are assumed
to be one-fourth of total current outlays, as for 1970.
b. Forestry. Total outlays (1.050 billion rubles) are the sum
of wages (0.754 billion rubles), social insurance deductions
P?
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(0.033 billion rubles), and other current outlays (0.262 billion
rubles). Wages are the product of reported employment (0.459
million persons--Narkhoz 1983, p. 385) and the average wage rate
(136.9 rubles per month--Trud v SSSR (Moscow: Finansy
statistika, 1988), p. 149). Social insurance deductions are
calculated as 4.4 percent of wages, as for state agriculture.
Other current outlays are assumed to be one-fourth of total
current outlays.
c. State administration and administration of social
organizations. Total outlays (7.080 billion rubles) are the sum
of wages (4.962 billion rubles), social insurance deductions
(0.347 billion rubles), and other current outlays (1.770 billion
rubles). Wages are the product of
persons--Narkhoz 1983, p. 386) and
rubles per month--ibid., p. 394).
are calculated as 7.0
Other current outlays
current outlays.
d. Municipal and related services
(1) Culture outlays (2.661 billion rubles) are
employment (2.591 million
the average wage rate (159.6
Social insurance deductions
percent of wages,
are assumed to be
the new rate set in 1982.
one-fourth of total
the
SUM
of
wages (1.865 billion rubles), social insurance deductions (0.131
billion rubles), and other current outlays (0.665 billion
rubles). Wages are the product of employment (1.362 million
persons--Narkhoz 1983, p. 386) and the average wage rate (114.1
rubles per month--ibid., p. 394). Social insurance deductions
are calculated as 7.0 percent of wages, the new rate set in 1982.
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Other current outlays are assumed to be one-fourth of total
current outlays.
(2) Municipal services outlays (1.481 billion rubles) are
the sum of wages (1.061 billion rubles), social insurance
deductions (0.050 billion rubles), and other current outlays
(0.370 billion rubles). Wages are the product of employment
(0.636 million persons) and the average wage rate (139.0 rubles
per month). Employment is derived by extrapolation from data
given for 1970 and 1980 (in GNP 1970, p. 54, and Pravda (24
December 1981): p. 3, respectively). The wage rate is that of
the total housing-communal services sector (Narkhoz 1983, p.
394). Social insurance deductions are calculated as 4.7 percent
of wages, the rate set in 1982 for communal services enterprises.
Other current outlays are assumed to be one-fourth of total
current outlays.
(3) Civilian police outlays (4.085 billion rubles) are the
sum of wages (2.688 billion rubles), social insurance deductions
(0.376 billion rubles), and other current outlays (1.021 billion
rubles). Wages are the product of employment (1.011 million
persons) and an estimated wage rate (221.6 rubles per month).
Employment is estimated at 67.6 percent of employment in "other
branches of material production" (1.495 million--Narkhoz 1983, p.
386). The wage rate is assumed to be 25 percent above the
average wage rate of all state workers and employees (177.3
rubles per month--ibid., p. 393). Social insurance deductions
are calculated at an assumed 14.0 percent of wages, the rate set
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in 1982 for much of industry. Other current outlays are assumed
to be one-fourth of total current outlays.
3. Investment
a. Fixed capital investment
(1) New fixed investment
(a) Machinery and equipment investment (61.623 billion
rubles) is the sum of new fixed investment in machinery and
equipment (59.3 billion rubles), changes in warehouse stocks of
equipment requiring installation (0.097 billion rubles), and
acquisition of equipment by budget-supported institutions (2.226
billion rubles).
The new fixed investment portion of this estimate is
reported in Narkhoz 1985, p. 364, as the,"equipment, instruments,
and inventory" component of capital investment. This value,
given in 1984 estimate prices, reflects the results of the 1982
industrial price reform, which was not actually effected in
investment accounting until 1984.
The change in warehouse stocks of equipment requiring
installation (0.097 billion rubles) is estimated on the
assumption that the share of such stocks in the total value of
unfinished construction was the same in 1981 and 1982 as in 1985
(10.73 percent, calculated from Goskomstat Press Release No. 34
(24 February 1987) and Narkhoz 1986, pp. 324, 332). Unfinished
construction in 1981 and 1982 is given in Narkhoz 1984, p. 387.
The acquisition of equipment by budget-supported
institutions is not included in Soviet investment data but is
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estimated as follows. In 1982, union-republic budget outlays for
equipment were 1.598 billion rubles (Gosbyudzhet 1981-85, p. 49).
That value is raised to reflect total state budget outlays by
calculating that union-republic budgets financed 71.8 percent of
total outlays on education and culture, health, physical culture,
science, and administration in 1982 (reported in Gosbyudzhet
1981-85, pp. 25-26, 32, 34, 37).
(b) Construction and other capital investment outlays
by the public sector are estimated as the difference between
total new investment in construction and other fixed capital and
private expenditures on housing construction (1.736 billion
rubles, from table B-2, item 5, a). Total new investment in
construction and other fixed capital is derived as the difference
between the gross output of the construction sector (115.100
billion rubles, from Narkhoz 1982, p. 45) and estimated
expenditures on capital repair of structures (21.700 billion
rubles, estimated in worksheets).
(c) Net additions to livestock in the public sector are
derived in the same manner as for the private sector (in table B-
1, item 2, c, (2)). The calculation is shown below.
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Valuation of Net Additions to Public-Sector
Livestock Inventories, 1982
Number of Animals
Net Additions to
Livestock Inventories
End 1981 End 1982
Million Head
Million
Head
Rubles Per
Head
Billion
Rubles
Cattle
92.5
93.0
0.5
567
0.284
Hogs
59.1
60.9
1.8
189
0.340
Sheep and
goats
117.8
116.6
-1.2
38
-0.046
Poultry
741.6
767.4
25.7
4
0.103
Total
__
--
0.681
(2) Capital repair
This value (43.818 billion rubles) is the sum of
amortization deductions (33.702 billion rubles), budget
expenditures (8.130 billion rubles), and collective farm outlays
(1.986 billion rubles) for capital repair. The amortization
deductions are from Narkhoz 1985, p. 558. The budget
expenditures are estimated by raising the 1982 value for union-
republic budgets (5.837 billion rubles--Gosbyudzhet 1981-85, p.
49) to reflect total state budget outlays, as in item 3, a, (1),
(a) above. The collective farm outlays are estimated in
worksheets.
b. Inventory change
This value (30.885 billion rubles) is the sum of net
changes in inventories of state enterprises (29.825 billion
rubles, derived below) and of collective farms (1.060 billion
rubles, estimated in worksheets). Inventory change for state
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enterprises is estimated from data given in Narkhoz 1985, p. 554,
and Narkhoz 1980, pp. 511, 513. (The shares of the respective
items in 1980 are applied to total values for 1981-82.)
Billion Rubles
End 1981
End 1982
Total working capital
483.830
523.227
Less:
Money assets
42.577
46.044
Financial claims
47.415
51.276
Other working capital
3.871
4.186
Expenses of future periods
5.744
6.212
Livestock
17.950
19.412
Equals:
Inventory change
29.825
4. Research and development
This item is the sum of wages (10.251 billion rubles), social
insurance deductions (0.718 billion rubles), and material
expenditures (9.266 billion rubles). Wages are the product of
employment (4.475 million persons--Narkhoz 1983. p. 386) and the
average wage rate (190.9 rubles per month--ibid., p. 394).
Social insurance deductions are calculated as 7.0 percent of
wages, the new rate set in 1982. Material expenditures are
estimated in the same manner as the corresponding component of
the GNP index for research and development (see USSR: Measures,
pp. 108-110).
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5. Outlays n.e.c.
a. Net exports are the difference between total exports and
total imports valued in foreign trade prices (Narkhoz 1985, p.
572).
b. Defense n.e.c., unidentified outlays, and statistical
discrepancy is the difference between total outlays (item 8
below) and the sum of items 1; 2; 3; 4; 5, a; and 7.
6. Consolidated total value of goods and services, exclusive of
sales to households, is the sum of items 1 through 5.
7. Transfer outlays are from table B-1, item 8.
8. Consolidated total outlays are equal to total income from
table B-3, item 9.
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Table 8-5
USSR: GNP by Type of Income, 1982
Billion Rubles
1. Wage bill 251.611
a. State wages and salaries 245.021
b. Military pay and allowances 6.590
2. Other and imputed income 94.948
a. Net income of households from agriculture 61.876
b. Military subsistence 3.510
c. Other money income currently earned and
statistical discrepancy 14.753
d. Imputed net rent 2.199
e. Imputed value of owner-supplied
construction services 0.554
f. Charges to economic enterprises for
special funds 12.056
(1) Education 0.758
(2) Research 6.590
(3) Social-cultural measures and sports
activities 0.300
(4) Militarized guards 2.043
(5) Support for administration of
higher echelons 2.364
3. Social insurance 23.947
4. Profits 119.413
a. State enterprises 117.985
(1) Retained profits 17.482
(2) Deductions from profits 100.503
b. Collective farms -1.615
(1) Retained income -2.371
(2) Tax on income 0.756
c. Consumer cooperatives 1.798
(1) Retained profits 1.049
(2) Tax on income 0.749
d. Other organizations 1.245
(1) Retained profits 0.871
(2) Tax on income 0.373
5. Depreciation 90.685
6. Turnover and other indirect taxes 187.661
a. Turnover tax 107.864
b. Miscellaneous charges 79.798
7. Allowances for subsidized losses n.e.c. -54.526
8. Gross national product 713.739
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This table combines the household and public-sector incomes
derived in tables B-1 and B-3 respectively. Total GNP is equal
to the sum of total incomes, excluding transfers, from those
tables.
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Table B-6
USSR: GNP by End Use, 1982
Billion Rubles
1.
Consumption
381.375
a.
Goods
298.106
(1) Food
177.588
(2) Soft goods
79.735
(3) Durables
40.784
b.
Services
82.269
(1) Housing
6.080
(2) Utilities
6.372
(3) Transportation
10.745
(4) Communications
2.725
(5) Repair and personal care
13.554
(6) Recreation
4.136
(7) Education
24.619
(8) Health
14.593
(9) Other
0.445
2.
Investment
231.253
a.
New fixed investment
156.550
(1) Machinery and equipment
61.623
(2) Construction and other capital outlays
93.400
(3) Net additions to livestock
1.528
b.
Capital repair
43.818
c.
Inventory change
30.885
3.
Other public-sector expenditures
101.110
a.
Government administrative services
19.097
(1) General agricultural programs
2.741
(2) Forestry
1.050
(3) State administration and administration
of social organizations
7.080
(4) Municipal and related services
8.227
(a) Culture
2.661
(b) Municipal services
1.481
(c) Civilian police
4.085
b.
Research and development
20.234
c.
Outlays n.e.c.
61.778
(1) Net exports
6.754
(2) Defense n.e.c., unidentified outlays,
and statistical discrepancy
55.024
4.
Gross national product
713.739
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This table combines the household and public-sector outlays
derived in tables 8-2 and B-4, respectively. Total GNP is equal
to the sum of total outlays, excluding transfers, from those
tables.
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Appendix C
Results of Factor Cost Adjustment of 1982 Soviet GNP
This appendix summarizes the results of adjusting 1982 Soviet GNP
from established prices to factor cost.
Table C-1 shows the distribution of GNP by type of income--or
value added--in established prices among the sectors in which
that income originates. The total value of each type of income
is from appendix B, table B-5.
Table C-2 presents the results of adjusting these estimates of
GNP by sector of origin to factor cost:
o With a few minor exceptions, estimates of the state wage
bill, social insurance deductions, other labor income, and
depreciation are the same as for GNP in established prices.1
o Estimates of profits, indirect taxes, subsidies, and other
nonlabor. income are subtracted from GNP in established
prices, and returns on capital (fixed, working, and
unfinished construction) are added back.
'The exceptions are that the factor cost adjustment changes the
estimates of the wages, social insurance, and other labor income of
military personnel and the depreciation estimates for housing,
education, health, and science.
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Table C-3 shows the distribution of GNP by end use in
established prices among the sectors delivering output to the
various uses. The total value of each type of end use is from
appendix B, table B-6.
Table C-4 presents the results of adjusting these estimates of
end-use GNP to factor cost. To calculate this adjustment:
o Indirect taxes and subsidies that fall directly on specific
end uses are first subtracted from the affected values in
established prices.
o After this preliminary step, the deliveries of each sector
to all end-use categories are multiplied by the price ratio
implied by the factor cost adjustment of that sector's value
added.
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Table C-3 Billion Rubles
USSR: GNP by End Use in Established Prices, 1982
Industry
Ferrous metals
Nonferrous metals
Fuel
Electric power
Machinery
Chemicals
Wood, pulp, and paper
Construction materials
Light industry
Food industry
Other industry
Construction
Agriculture
Transportation
Communications
Trade
Services
Consumer services
Housing
Utilities
Repair and personal care
Recreation
Education
Health
Science
Credit and insurance
Government administration
General agricultural
programs
Forestry
State administration
Culture
Municipal services
Civilian police
Military personnel
Other branches
Gross national product
Consumption Invest- Government
Goods Services ment Services
Research Exports Imports
& Devel-
opment
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Table C-1 Billion Rubles
USSR: GNP by Sector of Origin in Established Prices, 1982
Industry
Ferrous metals
Nonferrous metals
Fuel
Electric power
Machinery
Chemicals
Wood, pulp, and paper
Construction materials
Light industry
Food industry
Other industry
Construction
Agriculture
Transportation
Communications
Trade
Services
Consumer services
Housing
Utilities
Repair and personal care
Recreation
Education
Health
Science
Credit and insurance
Government administration
General agricultural
programs
Forestry
State administration
Culture
Municipal services
Civilian police
Military personnel
Other branches
Gross national product
State Social Other Deprecia-
Wage Insurance Labor tion
Bill Deductions Income
Profits Indirect Subsidies Other
Taxes Nonlabor
Income
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