USSR: Measures of Economic Growth and Development, 1950-80

Approved for Release: 2019/07/19 C05210421
Appendix E
Conversion of 1970 GNP
From Established Prices
to Factor-Cost Prices
The 1970 GNP data in established prices are convert-
ed to factor-cost prices in four steps: (1) arrangement
of the established-price data in a format compatible
with Soviet input-output (I-O) definitions, (2) conver-
sion of the established-price data to producers’ prices,
(3) estimation of a 1970 I-O table in producers’ prices
consistent with the GNP data, and (4) use of the I-O
table to convert the GNP data in producers’ prices to
factor-cost prices. This appendix describes all four
steps.
I-O tables are used to associate changes in value
added by sector of origin with changes in end use
expenditures. The conversion from established prices
to factor-cost prices involves (1) the elimination of
those elements of prices which do not reflect payments
for factors of production (land, labor, and capital) or
for goods and services used in the production process
and (2) the reestimation of payments for capital
services (profits and depreciation) to provide an equal
rate of return on capital in all sectors. Because both
types of changes involve the value-added component
of a sector’s prices, they directly affect the prices of
the goods produced by that sector, whether the goods
are delivered directly to final end uses or are pur-
chased by other sectors. Changes in value added,
therefore, change the prices of all final goods either
directly or indirectly. Taking account of the direct
and indirect sources of price changes for the elements
of GNP by end use requires information on the
structure of each sector’s purchases of intermediate
goods and services. It is this information which is
included in an I-O table and which leads us to
estimate a 1970 I-O table. (For a description of I-O
tables in general and Soviet I-O tables in particular,
see Vladimir G. Treml, Dimitri M. Gallik, Barry L.
Kostinsky, and Kurt W. Kruger, The Structure of the
Soviet Economy: Analysis and Reconstruction of the
1966 Input-Output Table, New York, Praeger Pub-
lishers, 1972.)
163
Arranging the GNP Data in an I-O Format
The first step in the construction of a 1970 I-O table
is to fill in as much of the table as possible with the
available information. In this case, the value-added
quadrant of the I-O table can be filled in using sector-
of-origin GNP data. Values in the final demand
quadrant rely on end-use GNP data. (For a discussion
of the relationship between GNP and an I-O table, see
Philip M. Ritz, “The Input-Output Structure of the
U.S. Economy, 1972,” Survey of Current Business,
February 1981, pp. 34-37.) In addition, gross output
data can be estimated from published Soviet data.
Putting the GNP data into a Soviet I-O table requires
two sets of adjustments. First, the definitions of our
GNP sectors often differ from the Soviet definitions
of the corresponding I-O sectors, and the data must be
adjusted accordingly. Second, a Soviet I-O table
includes only the so-called productive sectors. We
therefore have to rearrange our GNP data for the
nonproductive sectors to conform with the Soviet
treatment of such data in their I-O tables. This
section summarizes these two adjustments.
In order to conform with the definitions of Soviet I-O
sectors we have made the following changes to the
sector-of-origin GNP data in table D-6:
~ The value added of the repair and personal care
services included in Soviet industrial statistics was
transferred to the machinery; wood, pulp, and pa-
per; light industry; and other industry sectors.
' The value added of the utilities sector connected
with water and sewage services was transferred to
the other industry sector, and the value added
connected with urban gas distribution was trans-
ferred to the transportation sector.
Approved for Release: 2019/07/19 C05210421