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

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are classified as final output in our GNP accounts.
Expenditures funded by ministries and enterprises for
the final development and implementation of produc-
tion of new products are considered to be intermediate
purchases.“
The value of services, such as health and education,
that are paid for by enterprises presents a similar
problem. In the United States, businesses normally
pay for health and educational services directly con-
nected with employment. Most Soviet health and
education expenses are paid for by the government,
but enterprises also are thought to pay significant
amounts. Soviet data, however, do not identify which
expenditures are for private consumption and which
are incidental to the production of goods and services.
In these accounts, we estimate the volume of enter-
prise payments in 1970 for education and then classify
all educational services as final output, contrary to
US practice.
Valuation of government services poses a question of
comparability. In the United States, government serv-
ices are valued at cost, as the sum of all current
expenditures for materials, services, and wages. This
procedure undervalues these services relative to pri-
vately provided services because there is no allowance
for profits or depreciation. In estimating Soviet GNP,
we have followed the same practice, but the more
extensive nature of government services in the USSR
leads to greater distortion on this account.
The Second Economy. The second, or unofficial,
economy in the Soviet Union has grown rapidly, and
both its size and significance are now discussed
widely. Grossman asserts that the second economy
constitutes a large share of the Soviet economy and
that its incomplete accounting in GNP distorts meas-
ures of the size and distribution of Soviet output.
Schroeder and Greenslade argue that the most impor-
tant aspects of the second economy are already ac-
counted for in the GNP accounts as presented here.”
" The exact coverage of the Soviet official data on science
expenditures is uncertain. In particular, some prototype production
may not be included.
" Gregory Grossman, “The ‘Second Economy’ of the USSR,”
Problems of Communism 26, September-October 1977, pp. 25-40;
and Gertrude E. Schroeder and Rush V. Greenslade, “On the
Measurement of the Second Economy in the USSR," ACES
Bulletin 21, spring 1979, pp. 3-21.
The term “second economy" normally is defined to
encompass the entire range of private productive
activity in the Soviet Union. Most of this activity is
legal, including private agricultural production, pri-
vate housing construction, and the sale of privately
produced services such as health, education, and
recreation. Although the present accounts attempt to
cover this activity, in all likelihood they do not capture
it completely.
In addition to the legal activities, a wide variety of
illegal activities are carried on, including the theft and
sale of state property and the illegal production of
certain products, the most prominent of which is
liquor.“ The practice in the US accounts is to exclude
illegal activities, and that rule is followed here.”
Imputations. Several imputations are necessary to
account for production that takes place outside of
normal buyer-seller relationships and, hence, does not
have any monetary value assigned to it. In the Soviet
Union, the prime categories of such activity are
agricultural production consumed in kind, the value of
food and clothing given to members of the armed
forces, and the rental value of owner-occupied hous-
ing. The goal is to attach a value to these activities
using the same prices for which equivalent goods are
sold. Thus, the retail prices of food and clothing are
used to value military subsistence, the average rent
per square meter of state housing is used for estimat-
ing the rental value of owner-occupied housing, and
the average realized selling price of each type of
agricultural product is used to value agricultural
output consumed in kind. Valuation of owner-occu-
pied housing presents a special problem in that state-
owned housing is heavily subsidized, and the proce-
dure adopted here implicitly provides a similar
subsidy for private housing. The quality of state
housing may be superior to that of private housing,
but the evidence is insufficient to make an
adjustment.
" An estimate of private production of liquor in the Soviet Union is
in Vladimir G. Treml, “Production and Consumption of Alcoholic
Beverages in the USSR: A Statistical Study,” Journal of Studies
on Alcohol 36, March 1975, pp. 285-320.
’° The effects of illegal activities on GNP are discussed in Edward
F. Denison, “Effects of Selected Changes in the Institutional and
Human Environment Upon Output Per Unit of Input," Survey of
Current Business 58, January 1978, pp. 37-42.
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