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| Q1: What was the growth pattern of the Soviet Union? |
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InputDate: 7/10/2006 |
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| Reference: Hayami, Yujiro. Development Economics, From the Poverty to the Wealth of Nations, Second Edition, Oxford University Press. p150-1 | |||
| A: A sharp contrast with USA and Japanese cases can be found in the experience of the former Soviet Union. |  |
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Soviet accounting has been converted to the Western national income system |
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| Table accounts for growth in gross national product (GNP) in the Soviet Union in a comparable format to the USA and Japanese accounting in the Previous table. National income in the Soviet Union and other socialist economies was measured as 'net (or gros) material product', which excluded value added from many service activities. In the absence of factor markets in the central planning system, a constant weight applied to capital is considered a kind of informed guess on the production elasticity of capital. Growth accounting by Yasuhiko Yoshida (1990), based on the Soviet official statistics of net material product, produced assentially the same conclusion as that based on the GNP estimates. | |||
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High capital-labour ratio and high productivity growth until 60s |
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| The economic planning of the Soviet Union can be regarded as a polar case for pushing forward the economy by maximizing capitalll accumulation under the directive of government. Reflecting this drive, the rates of increase in the capital-labour ratio were much higher than the advanced market economies (e.g. compare USA and Soviet Union). The rates of labour productivity growth were also high from the interwar period to the 1960s. | |||
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Soviet growth pattern until 60s was similar to USA and Japan in their early industrialization |
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- the growth in labour productivity was exceeded by increase in the capital-labour ratio over a wide margin, implying major increase in the capital-output ratio. - Contribution of TFP to labour productivity growth had been modest, ranging from about 20 to 40 per cent. - This pattern of Soviet economic growth until the 1960s was similar to those of the USA and Japan in their early industrilization. |
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Soviet economy was trapped to Marx pattern |
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- in the later period in the Soviet Union it dropped sharply to negative levels during 1970s and 1980s. - This data clearly show that Soviet economic growth failed to shift from Marx to the Kuznets pattern. |
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| Reference: | |||
| Ofer, G. (1987). Soviet Economic Growth: 1928-85, Jopurnal of Economic Literature, 25(Dec.):1767-833 | |||
| Yoshida, Y. (1990), Soren, Toou Shokoku no Keizai Hatten to Seisansei no Susei (Economic Development and Productivity Trend in Soviet Economy and Easter European COuntries) (Tokyo: Kazama Shobo) | |||
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Previous Item| Q2: What are the differences in Kuznets and Marx pattern of growth? |
:2 FAQID:651 |
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InputDate: 7/15/2006 |
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| Reference: Hayami, Yujiro. Development Economics, From the Poverty to the Wealth of Nations, Second Edition, Oxford University Press. p158-60 | |||
| A: The Table below summarizes characteristics of the Marx pateern that appear in the initial stage of industrialization (Phase I) and the Kuznets pattern in the advanced stage (Phase II) in terms of 'stylized facts' or common trends in the major economic indicators of the growth process. The stylized facts for the Kuznets pattern were those outlined by Kuznetz (1966, 1971) as characteristic of modern economic growth and were popularized among economists, as represented by Samuelson's textbook (Samuelson and Nordhaus, 1985:793-6). |  |
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Per capita income increase under both Kuznets and Marx pattern |
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| As shown in row (1) and (2), both the Marx and the Kuznets patter are characterized by the rising trends in national income per capita (Y/N) and per worker (Y/L). However, the commonality ends at this point. | |||
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Capital output ratio increases in Marx and decreases in Kuznets pattern |
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| In the Marx pattern, K/N and K/L increased faster than Y/N and Y/ respectively, to result in increases in the capital-output ratio (K/Y), whereas the reverse is the case in the Kuznets pattern as indicated in row (3). This implies that decreasing returns to capital set in with increased application of capital per worker gor a fixed or small shift in production function underlying the Marx pattern. in contrast, in the Kuznets pattern, the decreasing retirns were overcome by a large shift in production function. Different assunptions on production function shifts are shown in row (8) in the form of small versus large contributions of TFP (total factor productivity) growth to growth in per capita and per-worker outputs between the Marx and the Kuznets patterns. | |||
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Income share for capital increases in Marx |
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| In the Marx pattern, despite increases in the K/L ratio, the income share of capital (rK/Y) increased, implying that technical progress during Phase I was biased toward the capital-using and labour-saving direction in the Hicks definition (if the elasticity of substitution is less than one). I(t is considered that because of this bias, the rate of return to the capital, as reflected in the interest rate (r), was prevented from decreasing sharply relative to the wage-rate (w). The capital using bias in technicalprogress is consistent with the small contribution of TFP to product growth in Phase I, because increase in the income share of capital trand to make capital's contribution to product growth larger, with the consequence of a small residual in conventional growth accounting. | |||
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Income share for capital decreases in Kuznets pattern |
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| In the Kuznets pattern, the income share of capital decreased, while the wage rate increased and interest rate remained unchamged. These trends are consistent with the hypothesis that the technical change was biased towards the labour-using and capital saving direction, even through the less than unitary elasticity of substitution should have also contributed to the decrease in capital's share, corresponding to to increased K/L ratio. | |||
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Saving ration increase under Marx pattern and stable under Kuznets pattern |
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Marx's theory predicted an increase in the rate of saving relative to national income (S/Y) in the capitalist development process because income tends to be concentrated in the hands of wealthy capitalists who have a higher propensity to save. In our interpretation, however, the high saving propensity could not have maintained unless technology was developed towards the capital-using direction so that the rate of return to capital was maintained at a decently high level. The largely stable rate of saving in the Kuznets pattern under the increased income share of labour, due to sharp rizes in the increased wage rate relative to the interest rate, reflects the high propensity of the middle-income working class to save as their wage income continued to rise - the situation diametrically opposite to Marx's assumption of no saving by labourers. |
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