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

Approved for Release: 2019/07/19 C05210421
I-O table because relative producers’ prices are
thought to be more stable over time than relative
purchasers’ prices.
Since Soviet I-O tables show only the productive
sectors,“ while the transportation and communica-
tions sectors furnished both productive (freight trans-
portation) and nonproductive (passenger transporta-
tion) services, these GNP sectors must be
disaggregated. In addition, to obtain a value-added
quadrant in producers’ prices, we must compute: (1)
the implicit subsidies received and turnover taxes paid
by each productive sector on its material purchases,
(2) the nonproductive services purchased by each
sector, and (3) the material purchases of the service
sectors. These estimates are explained in more detail
in appendix E.
The 1970 I-O table is estimated with the help of a
least squares minimization algorithm. It estimates a
1970 I-O table in producers’ prices that is as much
like the actual 1972 table as possible, with the
constraint that each row and column must sum to a
predetermined amount. The row and column sums are
determined as each sector’s gross output less, respec-
tively, its value added or final demand. See appendix
E for further discussion of the algorithm and its
rationale.
Many of the steps taken to compute the 1970 I-O
table in producers’ prices are part of the conversion to
factor-cost prices, notably the elimination of turnover
taxes and subsidies on final goods and services. The
remaining steps eliminate the rest of turnover taxes
and subsidies and replace profits with a uniform
capital charge. In our earlier publication on the 1970
GNP accounts, the uniform capital charge was set at
12 percent of the sum of fixed and working capital.
The present report follows the work of Brown, Hall,
“ The Soviet Union divides its economy into productive and
nonproductive sectors. Productive sectors are those which produce
material goods (industry, construction, and agriculture) and those
which are needed to deliver material goods to their final user
(freight transportation, business communications, and wholesale
and retail trade).
and Licari in applying I-O repricing algorithms,
developed originally for East European I-O tables, to
determine the interest rate.“
The repricing procedure or algorithm relies on a basic
property of an I-O table: that the sum of the entries in
a particular column must equal the sum of the entries
in the corresponding row. That is, a sector’s sales must
equal its total expenses, including profits. This proper-
ty, plus the distribution of each sector’s sales de-
scribed by an I-O table, provides the ability to relate
an increase in the price of the output of one sector to
increases in the costs of all sectors. Thus, equalizing
the rate of return on each sector’s fixed and working
capital implies a given set of changes in relative
prices, and the I-O table can be used to compute
directly the required array of price changes.
A Comparison of Established and Factor-Cost Prices
Tables 10 and 11 compare the percentage distribution
of GNP by end use and by sector of origin, in
established prices and in factor-cost prices. As expect-
ed, the largest difference in the end-use distribution
(table 10) is the increase in the share attributed to
services, especially housing, when factor-cost prices
are used. Expenditures on consumer services, which
were 11.6 percent of GNP in established prices, are
19.5 percent of GNP in factor-cost prices. The hous-
ing share increases from 0.9 to 7.0 percent of GNP.
The shares of most other services also rise.
The major reductions in GNP shares are in consumer
goods, especially beverages, soft goods, and durables.
These changes stem mainly from the elimination of
turnover taxes. As a whole, however, the share of
consumption is about the same in established prices
(55.1 percent) as in factor-cost prices (54.2 percent).
The share of investment is virtually unchanged by the
use of factor-cost prices. Total investment is 28.5
percent of GNP in established prices and 28.2 percent
in factor-cost prices, with the structure almost the
same. '
“’ Alan A. Brown, Owen P. Hall, and Joseph A. Licari, Price
Adjustment Models for Socialist Economies: Theory and Empiri-
cal Technique, International Development Research Center. Bloo-
mington, Ind., 1973.
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Approved for Release: 2019/07/19 C05210421