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

Approved for Release: 2019/07/19 C05210421
It should be clear that the AFCS is an imperfect
measure of production potential and that our empiri-
cal application of it is even more imperfect. The prices
that we implicitly construct using the AFCS are not
the equilibrium prices of Western national income
theory, and the data do not exist to implement the
AFCS with great precision. Nevertheless, the AFCS
is to be preferred to Soviet established prices because
it removes major price distortions and provides a
better measure of changes in production potential and
resource allocation than do Soviet prices.
Our application of the AFCS builds on the work by
Bergson and Becker. Starting with established prices,
they deleted turnover taxes and added subsidies to
arrive at GNP by sector of origin at factor cost. The
effect of these price changes was then estimated on
the various components of GNP by end use. The same
adjustments also are done here. The availability of
reconstructed Soviet input-output tables, however,
permits some improvement in the allocation of the
adjustments among end-use sectors. In addition, we
replace profits with a capital charge which is calculat-
ed as a percentage of each sector’s stock of fixed and
working capital, and extend our earlier use of the
input-output tables by integrating the service sectors
into the adjustment process.
Soviet GNP in 1970 in Established
Prices and at Factor Cost
This section presents GNP accounts for the Soviet
Union in 1970 in established prices and then converts
the accounts to factor-cost prices, step by step:
~ The 1970 accounts in established -prices are elabo-
rated into an input-output framework.
¢ A 1970 input-output table in producers’ prices is
estimated.
- A factor-cost repricing algorithm is developed and
applied to the 1970 input-output table.
The Revised 1970 Soviet GNP Accounts
ClA’s original estimates of the 1970 GNP accounts
were published in 1975.“ The revisions in those '
accounts to take account of new information are
described in appendix D, and the revised accounts are
" CIA, GNP 1970.
summarized in tables 8 and 9. These accounts are
based on an elaboration and recombination of the
income and outlay flows described above. The income
account (table 8) combines portions of the left-hand
column in each of the individual accounts. Thus, state
wages and salaries are the sum of items 1.2 and 2.2.
Similarly, the expenditure account (table 9) shows
data from the right-hand side of each set of accounts.
In order to estimate the relationship between estab-
lished prices and factor-cost prices, it is necessary to
identify the effect of a price change in one sector on
the price level of all sectors. This is necessary because
a change in value added, such as replacing profits by a
capital charge, represents a price change. The device
used for this purpose is an input-output (I-O) table. It
shows the structure of each sector’s purchases from
and sales to each sector, which allows the direct and
indirect effects of a price change to be traced. In order
to use an I-O table, the data in tables 8 and 9 need to
be disaggregated according to I-O definitions. The
value-added quadrant of an I-O table identifies the
types of income shown in table 8 with the sector in
which it is produced (columns of the I-O table).
Similarly GNP by end use (table 9) represents the
final expenditures on final goods and services. The
final-demand quadrant of the I-O table identifies
these expenditures with the sectors from which they
are purchased (rows of the I-O table). Both of these
disaggregations are shown in appendix E.
Construction of the 1970 Input-Output Table and
Conversion of the 1970 Accounts to Factor Cost
The construction of the 1970 input-output table pro-
ceeds in two steps. First, the established-price data
are converted to producers’ prices. Then the converted
data are used with an I-O updating algorithm to
estimate a 1970 I-O table in producers’ prices based
on the structure of the Soviet 1972 I-O table in
producers’ prices. Producers’ prices are equal to estab-
lished prices less turnover taxes, plus subsidies, less
trade and transportation expenses on delivered prod-
ucts.” Producers’ prices are used to estimate the 1970
" For a detailed discussion of producers‘ prices, see Vladimir G.
Treml et al., Conversion of Soviet Input-Output Tables to Produc-
ers'Prices: The 1966 Reconstructed Table, US Department of
Commerce, Bureau of Economic Analysis, Foreign Economic Re-
port No. l, Washington, D.C., 1973.
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Approved for Release: 2019/07/19 C05210421