SOVIET REGIONAL DEVELOPMENT IN 1960-69: TRENDS AND IMPLICATIONS

Created: 4/1/1972

OCR scan of the original document, errors are possible

SOVIET REGIONAL DEVELOPMENT: TRENDS AND IMPLICATIONS

by

Douglas Whilehouse

CIA HISTORICAL REVIEW PROGRAM RELEASE IN FULL

2

CONTENTS

Poge

Highlights

Discussion

Introduction

Soviet Policy Toward Regional Development

The Soviet

Policy

Regional Trends in Per Capita National Income. Industrial Output,

and Agricultural

Regional Differences in

Regional Development in tlie

Regional Trends in Population Growth

Natural

Regional Investment

Inconsistency Between Regional Policy and Investment

Higher Growth of Productivity in the More Developed

Implications for Soviet Policy

Investment

Migration

Plaus

APPENDIXES

Page

Appendix A. Primary Data Used in Calculating Regional Trends in Per Capita National Income, Industrial and Agricultural

Output, and Factor

Appendix It. Discussion ol Statistical and Analytical

TABLES

Page

USSR: Per Capita Regional Production0

USSR: Rates Of Natural Population Increase, by Republic and.1. USSR: The Contribution of Natural IncreaseMigration toGrowth, by

4. USSR. Index of Growth of Able Uodied Population, by Republic,

5 USSR: Combined Factor Piodurtiviiy in

6. USSR: Planned Growth, by Republic

i

ILLUSTRATIONS

Figure 1. USSR: Union Republics and RSFSR Economic1

Figure 2. USSR: Regionaln Average Animal Growth n( Per

Capita NationalMap) Figure 3. USSR; Regional Caps in l'er Capita National Income (Churl) Figure 4 USSR: Regional Variation* in Average Annual Crowth of Per

Capita Industrial1Map! Figure 5. USSR. Regional Caps in Per Capita Industrial Pmductton

(Chart)

Figure ft USSR: Regional Variation* in Average Annual <Jrowth of Per

Capita AgriculturalMap) Figure 7. USSR: Regional Caps in Per Capita Agricultural Production

.

Figure 8. USSR: Regional Variation* in Population

(Map)

Figure 9. USSR: Ranking of Union Republics, by Per Capita National

Income and Pa Capita New Fi*ed Investment (Chart)SSR. Per Capita New Fiud Investment, by Republic (Chart)

SOVIET REGIONAL DEVELOPMENT: TRENDS AND IMPLICATIONS

HIGHLIGHTS

Despite the official call for economic equality among the several regions and republics of the USSR, regional disparities in per capita income, industrial output, and agricultural production increased substantially during. By the end of the decade, those regions with the lowest levels of development inCentralnd Transcaucasianfallen even further behind the rest of the country in terms of per capita income and output. The principal reasons for this situation are extremely rapid population growth in the poorer regions, investment allocations that were not designed forregional differences, and the low productivity of labor and capital in many of the less developed regions.

Population growth in the Central Asian and Transcaucasian republics has been much greater than in any other area of the country over the past decade, primarily because of their high rates of natural increase. Interregional migration patterns, however, also contributed to regional disparities in populationreducing growth in areas with relatively low rales ol natural increase -nilgrowth in areas already having relatively high rates of natural increase. Migration into the southern regions has been influenced by Soviet wage policy. Kxisting regional wage differentials are insulficient to compensate for the rigors of living in remote Or climatically severe regions and make the southern cities far more attractive places of residence than the cold uncongenial areas of Siberia and the Urals.

The slowest growing areas in the country in terms of per capita national income are Azerbaydzlian, Uzbekistan, and Turkmenia, while the fastest growing are Lithuania, Belonissia, and Moldavia. In the three lagging regions, growth rates of population were among lhe highest in Ihe country, whereas national income growih was slower than in any other region because of the very low growih rates of industrial output. Conversely, the rapid growth of Lithuania, Belonissia, and Moldavia is reflected in above-average increases in national income, industrial output, and agricultural production together with much lower growth rates for population.

Investment allocations duringave not been oriented consistently loward reducing regional differences in production and income. Two of the poorerKazakh and TurkmenmoTcfunds per capita than wealthier republics, bul much of tins capital was directed toward tlie exploitation nf particularly rich mineral and fuel deposits.

Thrixifhmit Ihii paper, lite tenn Onltal Asia includes lite Kaakh tU'puhlle

1

Onther hand, ttw Georgian. Kirgiz, and Tadzhik Republics were givenalloeahom barely hall at largo ai those fuuiH-led into tbe Kazakh Re{HiMk Whether actual investment polky hat been to maximize national economic growth rather than to effetl regional parity is uncertain. Policyare confused and the remits arc mixed. Although industrial investments have not favored consistently thosehich the productivity of cornbtned labor and capital inputi was highest, investment allocations have notlanners" goal of reducing regional disparities.

Ai- impediment to narrowing the differences in regional level*is the relatively low growth of productivity oi labor andmany of the poorer regions Overindustrial output per

unit of combined inputs has grown very little in the less developed republics. In someTurltmrnia, andindustrial output grew at rates below the national averageecline in productivity offset the nhovc-aveiagi! growth of combined inputs of labor ami capital.

The present statin of regional development confronts Soviet planners and political leadersolicyignificant reduction of regional Income differentials and maximum national economic growth cannot be achieved simultaneously through investment strategy ulonc. Those regions that appear to have the best investment opportunities arc not the regions with the lowest income per capita. Moreover,lan data for the republics suggest that tbe geography pattern of development will not change radically over the neat five years. The new five year plan gives no prospect of reducing regional income differentialsoordinated redistribution of both capital and labor. Tims the regional disparities in development levels are likely to persist with little change during the new plan period. In fact, if planned industrial growth must depend primarily on increases in factor productivity, as stated by tbe leadership, tbe development gaps may continue to increase, with the less developed republics falling stiQ further behind the rest of the country.

2

DISCUSSION

INTRODUCTION

Although Soviet ccooomic developmenl has proceeded rapidly. its geographic incidence hai been very uneven. The persistent large differences tn pec capita income and production among regions axe surprising in view of the longstanding Soviet goal of providing id even distribution of productive forces (meaning industry primarily) over the entire country. However, tbe lack of progress tn this regard could, untile explained by theof the early industrialization drive. World War D, and the recovery from war.

The emphasis on speedy development, in conjunction withhortage of capital during, encouraged growth at editing industrial centers, which werearge extent the traditional manufacturing ccotrn in the European part of Tsarist Russia. Moreover, the massive transfer ofeastwardas still not sufficient to overcome the imbalance in the distribution of production. After the war. tlie concern with reconstruction coupledighly centralized branch principle of planning broughterritorial distribution of economic activity very little differed! from that existingnly after the, particularly with tho creation of the councils of national economyid attention to regional aspects of economic development increase appreciably.1

The purposeis paper is to assess the results of Soviet regional development policy duringhe framework of this policy is set out briefly, statistics on per capita national income, gross industrial output, and agricultural output are examined for thenion repubHcs and. where possible, the ten economic regions of tbe Russian Soviet FederatedSFSR' (teeational income cannot be calculated for the regions of the RSFSR, so their relative levels of development ate shown in terms of the two major contributing sectors to nationaland agriculturalIndustrial output per capitaful indicator becausedevelopment is llie leading edge of Soviet growth strategy. Therefore, the implications ol tliat strategy for regional development should be most visible in statistics un regional industrial output.

Next, regional trends in population growth are presented. Because theol output, income, and population shows thai regional dilfiTonlials were greater at the end ofhan at Ihe beginning, the paper goes on to investigate the reasons for (he failure to narrow the income gaps among regions. Finally, since some of the reasons have clear imputations for current and future Soviel economic policy and growth, these implications are discussed in the concluding section of the paper.

" Couneih of nationalwere esublohedi regnoa! oolta Mi an aVemeto tanuUteJcetuaanlBC bybeabeUtUd U> IMS.

Foe primary data Meed an cakniatag recnaul bendsr-.ii aaneaalMii outputrodrBvity. seeational mawata *em dewed from official Soviet tUbstm and rcAnt* Soviotbum The rllerti oi auk baaaea are doomed to Appmdia B. "UxUrit IV -iilpul mnrorn prMt ai>l

dala lotsriKilluial products.

3

SOVIET POIICY TOWARD REGIONAL DEVELOPMENT

The Soviet Minorities

Diversity is tho most striking characteristic of the Soviet popuLilinn.ationalities and about as many languages furm the ethnic and linguistic composition of the USSK. However, mosl of these ethnic groups arc quite small relative to Ihe total population. Onlyonstitute more thanf the (otal population and onlymoreevertheless, these six nationalities comprise the bulk of two ethnic groupings with vastly different cultures and attitudes. Tlie Russian, Ukrainian, and Bclorussian nationalities make up the bulk of the Slavic peoples and logelher accountf the total population; die Uzbeks, Tatars, and Kazakhs belong to the Turkic group and account% of the population. Tbe largest single nationality Is the Russian,f the total populationf these people live within the RSFSR, wherein they comprisef that republic's population. Russians also make up the largestn Kazakhstan, and iu all other republics Ihey rank either second or third. Only in Armenia, Georgia, and Lithuania do Russians comprise lessf the population.

Although the Soviets officially proclaim equality among the nationalities, Russian dominance generally pervades the political and economic life of the minority groups. Minority languages, literature, and arts are still supported and even encouraged, but the use of the Russian language increases throughout the USSR, and Russians cOutiuue to migrate to the cities of traditionally non-Russian areas, where they hold many ol the key positions as managers, professionals, and technicians. The other nationality groups, particularly the nationalities of the Central Asian republics, are generally less widely distributed than the Russians. These groups are heavily concentraled in their respective republics and usually form significant minorities only in immediately adjacent non-Russian republics.

The number of non-Russian people who claim Russian as their native language has been inching% of the population0 compared. Most of this increase has occurred among the Ukrainians, Jews, nnd Belorussians, and the percent of the non-Russian population speaking Russian fluentlyecond language is generally greatest among the Slavic and other Indo-European groups. Linguistic assimilation has been more difficult to achieve among the Turkic peoples, owing partly to the more rapid rate of growth of these peoples and partly to the much stronger cultural differences between the Turkic and the Russian peoples.

Policy Aims

Recause of ideological considerations. One of the goals of Soviet economic policy has been to equalize levels of development throughout the country. Originally part of Lenin's "nationalitiesconsidered economicrerequisite to political, social, and cultural equably and the eventual creationommunis!aim was set forth specifically in terms of industrial development in the resolutions ofh Party Congressconomic equality among the nationalities was to be achieved by ttaiisferring industry to tbe areas of minority nationalities.*

' KMtimuaicticfacskaT* Pwtiya Sotelskop. Soezdov,leoamov ttentrsfoogoowow. vol. Although what tlie Soviets meant byot clear (lor example, per capita mdnitrlal output,n. real iiicoint.ome otherVy apparently intended to equalise rcooumicin general and believed that industrialization was tbe matt effective means to ihu end.

5

Following th* IMi fatty Congress iu iki,itniDrive, the goal of equality wa* overshadowed hy tbe concern for rapid industrsabzatioii1 and maximum production at minimumince the less developed aiea* were less favorably endowed with the infrastrtir-tiire necessary for Ihe rapid development of heavy Industry (the primary focus of the industrialization drive') they received an insignificant share of the toialesult, little progress was made In the pursuit olparity.

Kevertliejeii, foi political and ideological reavins, equalization of levels of development among regions and republics hasenet of Sovietpolicy, ami the definition of 'development" has been broadened to include production in sectors other than industry* In tts present form, Soviet dcveteprnenl policy incorporates the objectives of both regional parity andproduction. Current statements on development policy, although somewhat ambiguous, seem to assign equal priority to both aims, nr. at least, to Im founded on the belief that the objectives are consistent.1*

In fart, conflicts arise in attempting to achieve IhiiIi regional parity and maximum production simultaneously. Since tlie best Investment opportunities are not necessarily In the less developed regions, heavy Investment allocations to these regionsnconsistent with the goal of maximizing overall pro-

l. Party Congress orslered pursuit ofquahiaaon goal to proceedlhe coswtrfcaO of net lenal kalemti {Ibid, vol

V .poManxb peoblesuv flragraraaWiogorcauysraVnnostiroa bar eko-onuh. no. 'A*ainy he*out.

For yean. indeed (oi it- whole period coveted ialmost

the whole economy ftvaied to produce ever more Heel lor the construction of ever mote steel nod other heavy industry factories, as well as for the output of ever more nrmxmcnl..

. Soviet

Ilse Development ot Soviet Location 'Ilieitry Before the Second WoiMoviet Studies, no. KoeopeeVy) argues enavliKinfly that lhe cmrJuii! on Increased devrlopuKiil of Ihe ulieady established indurtiial centeii during ibis period was mouvited primarily by defenseH. heavy Industry was considered the backbone ot1 laptd development ot heavy imlurtry waithe most warn to aulaary piepaicdiras*.

'Several Soviet speeUbm have radicated mat tbe eqsndintsM of de^loproeoi leveb .ucrnde. eonahang the level ofbe^f" of the population Hosvevei.ub irteml as to tbe -nethoWogy lor ne.turiacor easnple. are Trrapto. UN. I'revsu ekooouucVsWlayono* SSSR, Moscow.nd. "Soinnrmuyc urovssey khooayslwtinofa larvitiya ekraoeuebatilh rayonov SSSR. in Iisrw-kerho AA.W.my .umethcheruyaSSR.

"For ciamplo, In hi* speech tob Party Coiifties*osygin slated.

Onelie most Important conditions for increaunR tlie efficiency of social production It lhe correst suing of productive forces, which mimes the furtherdevelopment ul all lira union republic* and tho comment implementation of the Leninist nauoivalllieapr. cited io the Current Digest ol Soviet Press.

Abo. KM. Nelratov (Chairman of Ibe Coo nul for the Study ol Productive Forces) rccendy said.

Use fmeral plan lor the development and distribution of productive lorces for tbe period up0urther eqaahaatioo oi the level, of ecsaoteicof Ibe union reirabeics and economic reason* of the USSR.he ratrrrrpubbf div.iion ol labor and peoductioa reUtWad,.)

6

oreover, where relative retardation of economic growthegion Is the result Of initial iindci development romhiiicd with rapid population growth, rather than failure to adapt to changing conditionsrevious position of equality, the movement oi capital (including educational capital) into the underdeveloped region may have liltle elfect il not accompanied by aof labor out of the region.

The successful solution to the regional problem involves, in general, the application of the principle that each resource be moved to the place where it contributes most to production- If investment opportunities are greater in the well developed regions, then lhe pnmaiy means of moving Inward regional parity must be the movement of labor out of the less developed legions. This is the familiar "north-south" problem as exemplified by the American South In practice,ducational levels, cultures. languages, etc, may hinder population movement; the migration north in the United States has been going on for generations. Although adjustment is slow, the migration process canowerful faclnr in reducing regional incomeood example is Brazil during, where, despite the flow of private capital from the less developed Northeast to the relatively well developed Center-South, the migration of population in the same direction resultedarrowing of regional income differentials over theomewhat different case is that of Puerto Rico, where emigiation to the United States actedafety valve to population growth, and an influx of US capital provided the wherewithal for per capita income growth."

REGIONAL TRENDS IN PER CAPITA NATIONAL INCOME, INDUSTRIAL OUTPUT, AND AGRICULTURAL PRODUCTION

Regional Differences0

oviet economic regions could be classified into threehe well-populated industrially developed regions of the European USSH, containing collectively more than two-thirds of the country's population and three-fourths of the industrialhe sparsely populated pioneer regions of Siberia and the Far East, wilh only one-tenth of both the total population and industrial employment;he well-populated,underdeveloped regions of Central Asia, Transcaucasia, and the North Caucasus, encompassing onc-lifth of the population but only slightly more than one-tenlh of the industrial employment. The data inlearly show the large differences in the level of economic development among the individual regions of the USSR.

" However, il investment in tin- lesi developedarticularly Chose bordering on China, ii motivated primarilyr;l) defense interests as suggestedecent article. Koropeckyi, Oien the regional parity alni could be consistent with national Interests even If It conflicted, with the goal of muimlilng production.ore complete treatment of tlie defense motivation in invesUncnt decisions, ice Koropeckyi, 'Industrial Location Policy In the USSR DurinR the PoHwarS Congress. Joinl Economic Committee print. Economic Performance and the Military Burden in the Soviel Union,.

"DivergentConvergent Regional Rtxiof*nJc Growth nnd Interna! Migration Inconomic Development and Cultural Change,oec abo Baet. Werner. "Regional Inequality and Economic Growth inconomic Development and Cultural Change,op.

An Applicationlein Growth Model to Puerto" Economic Development and Cultural Chance,oart I,.

7

Table 1

USSR: Per Capita Regional Production0

Per Capita National Per Capita Irtdutlrial Per Capita AgricuUmnl

(OVO)

tpi '

Ionia

economic unions.

Baal

Valley

IJ

Riheria

**

Siberia

1

;

li

.ill cutom.per capita Industrial output and pel capita agricultural output touether eacoed ihe valueor per capita national Income beeame the three indicator* ol development are I'.i'-il on'i<'tii prices andhr nallixml InFOrtve data are haiedH price* and rellect the Manlrt conception ol net Income which inclmtn only the net product of theperinea. On the other hand, lite indiatnal output dala are batedSd reflect thr grnu output ol Industry, whuh in>hid*iminting of wanr producli. Tbe arru-ukural data are baaed on three-yeai moving aveiagn'<fi8nd reflect prod ml ion

met of iriti* aencvlroral Ota ol farra pmluiti bat nut rutudiag doableiouabog of pcrcKaiei Im other antoas.

Thr derivation of tKrae data at described In the note* to

KaAnngrad Oblast'.

As indicated tti Table I, tbe western republics, including the ItSKSR. started the decide with lhe highest levels of per capita national income, while the republic* of Central Asia and TranseancusiA had levels nl national Income per capita omsidcrably below (he national average. Not surprisingly, the levels ol industrial nulput per capita0 fell iuIume general itattem.

In teiuw of agriculturalhe picture was somewhat different While the Baltic republics and the Ukraine were again among the Leading regions, the Central Chernozem region,. and Moldavia made up for part of their Industrial backwardness with afoow-aveiage agriculturalHowever, in the remaining Central Avan republics and all of Trans-

" It thould lie noted that while agricultural product I'm per capita prtividri an Indication of Ihe relative wrlght of agricultureegion'* emirim) it may notnlc meawre of aKricu'lutiilIs, agriculture inuv jiiiy.iifelatively mull sliatc nl national iiKumeegionstill he highly developedmj of output per unit of InpuU

caucaua. per capita farm output trailed behind tlx- nailonal average This was also the case In some of Ihe Industrially developed regions within the RSFSR, spcdfi.ally the Urals. Center, and Northwest regions. In East Siberia and the Kar East, where fanning is limited by climate and transportation problems, the levels of per capita agricultural production were also below the national aveiage.

Special mention should be made of the three economic regions east of theSiberia, East Siberia, and the Far Easl.0 these regionswere near or above Ihe national average in terrm of per capita industrial production. Nevertheless, much of this territory, particularly in the Far East and East Siberia, consuls of virtually uninhabited wilderness, at the harsh physical and climatic conditions found there haw seriously hamperedconsonant wilh their resource base. Much greater financial outlays are required to establish and main lain the necessary facilities for permanent settle ments in these areas than in any other part of the country. Although the Soviet leadership has clung to lhe hope that the vast potential resources of these regions would provide the impetus for self-sustained growth andajor market area, this has not yet occurred

Regional Development in

The inability of the less developed Soviet regions In keep pace wilh the rest of the country is the most striking feature ol legional development in. Contrary to wlml mighl be the expected patternation whose policy ostensibly is to achieve regional equality, those regions with the lowest levels of development0 did not generally grow more rapidly duringhan the areas already highly developed0 In fact, percentage increases in per capita national income (see Figureere lowest in the republics ofAsia and Transcaucasia. Moreover, with the exception of Kazakhstan,that grew at rates below Ihe national averageeD even further behind.

Thus the gaps between these less developed regions and the rest of the country have lieen growing, as shown in Figurehe range of varlatinn In the levels of per capita national income among Ihe union republics, which was nearly COO rublesxlendinpelowbove Ihe national average,ubles byangingelowbove the nationalince Soviet nalionil Income data exclude any valuation lor services, the differences brtw-em the iwo extremes piobably woukl he even greater if national income were inea<uied by Western concepts, which include values of services. Ofpuhhc* in which per capitaincome was below the all-union averagenly Ij'huinia and lhe Ukraine were able to dose the gaps {which were minimaletween themselves andtitiii.il average Whilend bVlorussia Stillal levels Iwlow the national average, their nou'iom improvedrelative to the Central Asian and Transcaucasianor therepublics,0 deviations from average per capita national income (both positive and negative) increased considerably over lhe decade.

oefficient of variation, wtoch roeanirej lhe relative diiprnioti ol lhe republican data around the Man tea thr USSR, loneasedn IWOS1. In other wordt.

lhe liaWll IIromrt(he US.SR wai cieatei0 than

Indlcat.ni: giRitci irtiooal dianaray In developfBca? Ir-eli al the rod ol the decade.

9

In Icmis of pet capita induitri.il production, tbe tecord is only slightlysopithuania. Heloiiissla, Moldavia, and (he Central Chernozem, Volga, and Siberian regions, all nl which had below-average levelshowed relatively high growth rates characteristic of the usual "low level-fast growth, high level-slow growih" pattern. Tlie relatively low growth rates in tlie highly di-velopvd Northwest and Central regions alsolo this pattern. However, of theentral Asian and three Trarfcan-casian republics, only Kirgizia grew faster than the national average over lhe whole time span

esult ofates of growth, the relattvr standing of the republics and RSFSR economic regions in terms of per capita industrial production shifted appr.-ci.ihly (seen general, the western and Baltic republics and most region* of the RSFSR Ruined at lhe expense of the long-dominant Central und Northwest regions. The North Caucasus. Armenia, and Kazakhstan slipped Ojejillv while Georgia. Azrrhaydrliati, and the Uzbek. Tadzluk, and Turkmen llrpublics. which were well behindell still further in the .kings.

The pattern of regional variations in per capita agricultural growth resembles the regional differences in gains in per capita industrial production, although tbe absolute range of variation was considerably smaller. Growth was greatest in the Center and lhe Central Chernozem regions of the RSFSR, in Moldavia. Belomssia. and Lithuania, and in the Volga-Vyatka region; it was least (or negative) in Central Asia and Transcaucasia (seef those regions with below-average levch of per capita farm outputnly Ihe Center. Urals, Volga-Vyutlid, and the Far East regions of the HSFSR and Ihe Georgian and Turkmen Republics moved toward tlie national average in relativesee

Thus the trends incapita national income and industrial and agricultural production all confirm thr presencearge and growing disparity in ceorromu-development between the less developed areas (Central Asia, tbe Transcancasus. aod the North Caucasus region) and the rest of the country While the economies of all regions have progressed in the last decade, the rate of piogrcss in the les* developed regions has been loo slow for these regions to begin catching up to the rest of the country

REGIONAL TRENDS IN POPULATION GROWTH Natural Increase

The wide regional differences in population growth in the USSR duringsee Figureeflect patterns of growth that are characteristic of Ibe development process throughout much of the world. The lowest rates of natural increaseoccurred primarily in the European areas of lhe country (seehere urbanization is fairly well established and where per capita income is high. Conversely the highest rates are in Central Asia and the Caucasus where per capita income is low.

"The coefficient ot vailallon Increased slightly30Thr coefficient of variation showed an increase3 in IWK)WThe natural rate ofIncrease is tbetwrrn Ihe birth rate and lhe death ratehe numerical increasel the ontinff [icpiilabon

12

USSR: Regional Variations in Average Annual Growth of Per Capita Industrial' All-Union% par Year

Significantly aeoia average

(marc% pgr year)

Aiaragc groacltl

1toper year)

Siqnilicanliy belowleas tnan per yoar)

.

Eitrru J. Lalrijitlaitiitijoldaviaeotfi* I.tt'bailtnin

Iwimen

J.-bf.

Isdikik

Klrgu

M. Kiiakh

r.a

B.1

3.5

! '

i I

Rale ol Gi(*thl%l

HSFSB fcsaant

11

it

IT. CMtnl

II Nmlk

It

20.

IL

Witt

ni

it

USSR: Regional Variations in Average Annual Growth of Per Capita Agricultural* All-Unioner

aoove avaraga (nor*ear)

% par rear!

Signltxanllv balow avaragc

"So

tins lhan Iii pa*

raCJr *

n

ftiguailci

ilonii

Ulvla

LlltiUMIl

*

Btleiitiil

OViiirie

aUlflini

fieuglt

anneal'

iKtlifilihin

lurtmen

BtM*

B.7

iiithit

Kiigil

Kirath

Ritaitwlhl%)

MISB ItlWiil Rigilai

11

II

intril

II. Horlh

II

alai

11.

ii

ail

t(

ir.

Tabic 2

USSR: Rules of Natural Population Increase, by Republic and Region'

Per KOOO

4

3

3

da

1

East

3'

Siberia

9

Caucasus

'

Oman iii

7

Valley

im:

Siberia

!.'

. -

. .

9'

ia

Chenw.cr.i

i

NarodnoyeS

v 19

godn. ppp.

Tliese sviile variations in rales ol natural increase resulted primarily iiom large regional diffeteni.es in birth rates, as death rates varied relatively little among the regions. In Central Asia, for example, where Ihc urbanization processh lively reeenl phenomenon, birth rates svorc ihe highest in the tov.ntiy -more than double the rate inates Mire slightly lower than iu the RSFSR-

In addition to the usual "urban/rural" and "ilcve'eped/less developed" reasons, inherent differences in the cullural outlook ol diffeicnt nationalities, particularly hetwiien the Slavs at one extreme and tbe Turkic peoples at the other, have undoubtedlyource of disparate birth tales among the regions. Foraccordingecent survey on family size conducted by the Central Statisticalhe number of children considered "ideal" among married women varied from two to Ihrce in the Ivsrupean republics andthe RSFSR, tu from threeive in the lepnhlits of Central Asia andEven more striking Is lhe fact that the percentage of women who consider six or more children "ideal" is significantly gre;ilcr in the Central Asian and Transcaucasian republics than in .my oilier region of the country. In all regions, the number of children actually anticipated by the families in the survey svas slightly less than the number consideredanging from Iwo in the European areas and Ihe RSFSR lo three to four in Central Asia and Transcaucasia. These differences in attitudes regarding family size reflect, among

"The survey was conducted in tOftl and the irmht published in an article byatisliki. no.

other things, regional variations In the average age at marriage. The average age ol newly married couples in the RSFSR is1 for menor women and Increasing, but in Central Asia the average age is in thend stable. It is not surprising, therefore, that the natural rale of population increase is now as much as four times greater in lhe Central Asian republics as in the RSFSRhole.

Every region except the Tadxhik Republic shared in the remarkable decline in rates of population growth that occurred ini0s. Ibe general fall in rates of natural increase, however, did not disturb appreciably the substantial regional differences that existed

Migration

Usually, migration of population acts to reduce regional disparities ingrowth and incomeis, people move out of regions of high rales of population growth and low incomes Into regions of lower population growth and high incomes.pattern was most notable in (he Baltic republics of Latvia and Estonia, where in-migration was the dominant source of population growth, and in Aierbaydzhan. the only area of high population growth thatet out-migration during this period (see

Table 3

USSR:tribution of Natural Increase and Migration to Population Growth, by

Cei>ual Chen mans

Volga-Vyatka

Wert .Siberia Utah IVinruam

Cast Kdxrte

,

Cenle* North-eal

Turkmen

Vnlqa VaUay

Ukraine

Lithuania oldavia Far taw

(Mb*

Kirdi

ill. '

Latvia

.

Armenia

Kazakh Ted**

,

W populanon tha

km ml by comparing th. Imm naliuul rateaol Increase

Percentage Change iu Population

3

1

8

7

IS

16

15

3ft

ft

12

15

13

IS

24

90

45

42

S3

13

13

41

40

46

16

II

to Natural Percentageto Mifiatlon *

(Jul-mi* fallen

389 8

47 41

:i:

6

2 37

16

12

1egl Jn-migmlton

3

e

-1

On (he other hand, migration aggravated regionaln naturalt ionostlarding growth ot* population Inwith relatively low ratestural increase and augmentingiea< alrcadv having relatively high lates of natural increase. Out-migration from the regiuns of the RSFSR, with the rscepluin of the Ninth Caucasus and the Far East, tended lo reinforce the dfetts ol tin- already relatively low rates of natural increase. This effect was most promiitent in the Volga-Vyatka, Central Chernozem. West Siberian, and Urals regions where out-migration reduced the effects of natural population increase,, respectively. On lh. other hand, the net migration inlo the republics of Central Asia andhere tbe rates ol natural increase' were among the highest in the country, had just the opposite effect.

Much nf the migratinn over the last decade has been closely linked to the massive flow of rural residents to urban areas. Nearly one-hall the growth of the countryi unban population00 was due to the migration from rural to urban areas, although (he Intensity of the ratal-urban flow has not been uniform in all regions In the RSFSR, out-migraiHm from roral areas was approximately double the natural increase in these areas, resulting in an absolute decline in the nual population. The decline was most prevalent in the Central. Volga-Vyatka. Central Crarrnoxern. West Siberian. Nonhw.-st. and Urals regions. Within (he RSFSR, only tbe North Caucasus and Far East regions incurred an increase in rural population during this period. On the other hand, in tbe Central Asian republics tlie rapidly growing rural population has (ended to be considerably less mobile. In fact, Soviet dcroograplici* have pointed out that much of the urban population growth in theae republics has been (he result of an influx of people from other regions, notably from West Siberia and Ihe Urals, rather than Irom their own rural areas. In many coses this has created urban enclaves of Slavic people* surrounded by rural areas populated by ihe rapidly growing indigenous ethnic croups

Thus the economic growth that has taken place in the Central Asian republics in recent years has not been accompaniedeneral assimilation of the Turkic peoples into the urlian-indtislrial economy. In the absence of an influx of workeis from other legions, economic growth in these republics might well have been less,ontinuation of this pattern would enhance the colonial image thai tlie central government has heen trying to shed in these regions and limil (he opportunities for drawing lhe indigenous population into more advancedprocesses.

Practices followed in allocating labor, particularly highly skilled labor, do little to alleviate this condition. Students holding post-graduate degree* are generally assigned to remote areaseriod ol three years following com-pletion of their studies. Many of tht-se specialists avoid such duty through one or another loophole in the regulations. However, most of those who are unable toemote work assignment settle afterwards in olher regions, notably in the larger urban areas such as Moscow and Leningrad, or in the southern cities where the warmer climate provides considerable incentive after three years in the harsh northern or eastern regions. This attraction of skilled labor to the southern regions is reinforced by Soviet wage policy Regional wage differentials, designed to attractam labor in flu- more rcmoti* or clim.it i< illy severe regions (especially Siberia and (lie Farre insufficient to counter the altraction of the southern cities. Conserjuently, skilled laborers are pulled inlo the urban areas of Central Asia, where they are warmly received by empkiyers who would rather hire Slavs than the generally less well trained Turkic people at the same rates of pay.

The rapid population growth in the less developed regions wit accompaniedomewhat slower growth ol population ol working age (seeble-bodied population in the Central Asian repubbes grew00 (comparedopulation growth of) because of low population growth in the. However,he able-bodied population will surge because of the high birth rates. Hence, the problem of finding work for rural minority group labor will become even more acute in.

Tabic 4

USSR: Index of Crowth of Ahlc-Bodied Population, by Republic"

Armenia

KlIRiz

Iftbafc

Turkmen

Moldavia

Axerbnydarian

Estonia

Latvia

Georgia

llelomirfa

HSfSA

Ukraine

' Makn btfoeundean ol"rnndean al age. Basedpiutrd inr>

REGION Al INVESTMENT POUCY

According to all the measuresilli-ferncr among regions with respect to per capita income anil output s. idmed rather than narrowed duri'ij! lhe ltJUOs. The other maioi laetON dartcrininmg growth of income and output, ajvirl Irom population growth, are irin'Mmeut allocations, by region,th" lelurii un investment, by region

Incomiilency Between Regioeiol Policy ond Investment Allocationt

The pmlevied offk-tal policy ofrkrpedisrait by lhe pattern of in veil meritpita new find invest-

tat'ii! inas not favoredrepublics that had the

towol itiitlnnalper capita0

Although winie of the poorer republics not ably die Kazakh and Tuikmeumore investment funds pei capita than the richer republics.

'TL- Kriaiall lank mdotnew hardi uiuta regional moanem'J luIhei-i lhe seaae thai areas withrl.ai tended lo ba favored wafc leiitrtvtr UJi perioaeat> rapaeaaadWkiV- ttir crlitueuhlp did indirale apliajim' bias aa favoe ot lhethe molK .ertxaly didfi-mxllowrd The turlt.t il mvnlaurot aloea-

ll>ic> had Ihii hiviimIvlc-i) InrK Williimsntemy.

Figure 9

22

USSR: Ranking of Union Republics, by Per Capita National Income and Per Capita New Fixed Investment

the Georgian. Kirgiz, and Tad/Ink Republics wore given investment alloca-lions barely half as large as those funnelid into the Kazakh Republic. Monger, the relatively high investment allocations In the Kazakh and Turkmen Republics were used largely for the exploration ol mineral and fuel deposits. Allhough Soviet policymakers in making decisions Irom the center may have conSdcrod tbe regional parity goal, ileaily other factors must have tempered this con udrration when investment plans wrie made.

Within the RSFSR,apita investment allocations appear to have favored the less developed eaUem regions, particularly East Siberia ami the Far East. Througho.it most ol theer capita investmentn these regions appear to have been consistently higher than in any other legion of the RSFSR or in any other uruon republic- This may reflect, inlanners* preference for developing the eastern regions, though perhaps motivated less by equality considerations and moreesire to exploit the vast natural resource base in Ihese regions. The high invrstment allocations to the eastern regions of the IISFSlt may also reflect the greater costs incurred in the general development of these regiom.

Higher Growih of Productivity In Ihe More Developed Regions

To nanow the differences in regional levels of development significantly, the USSR must fly in Ihe face of thr best investment opportunities. Increases in industrial production are becoming relatively mote expensive to achieve in most of the less developed areas erf the USSR than in the already developed western regions. One measure of this is the relatively low growth of productivity of inputs of labor and capital in many erf the poorer regions.n

"Caraperabar brveatraeat dab foehe RSFSR -ere avaaaUe only7 ir NafadaeyeM7.

" Ahhourb II rt osoal to consider Itierapttalraboa when diwumn*rmittes, the frowth of combined lexer peooucttvftytoraadexed to beefiona. notetrieadaw to autrest that

increasei in output ara due lolely to capital acctumiration As CM. Meter points out. Even If we accept the eisuinption lhat theirixed relationship between capital and output as determined by technicalt doea not follow that we can infer from this relationship that only capital it needed to Increase output. We must abo consider cxpbritly the effect of other variable, onexample, the supply of trained manpower.IntMutxinaltUhides, ere. (Meier. Leading laues in Development Mconomk. (Sodrford University Ptesi, New

Labor and capital inputs wem combinedobb-Douglas production funcllon under the aunimpllon that the inputs were paid the value of Iheir marginal products io the bale year For the derivatkm <rf production function rorllkvnU, arc Appendix B.

The Measure of combined factor productivity woa derived aa tbe leeidual element wfckti for that part of the anuual pcrcrnUar uumaae In output io excess oftn

aggregateB,

]

A-Waafdaal (eaaabawd factor pasasvactrnty).

r Output,

L-Macduun of UborndustrMl liaed capitalndLabor aad roeffiomtx. Since Itesidual, combined factor productivity coven Ihe contribution of many fartors ta the growth of output inch ai the contribution of management improvements in resourceeconomies of stale, inctcates ill the ikdl level oi labor, aod any other phenomena lhat may affect the efficiency with which mduttiiii) productKincanted out.

23

Over Ihc pajl decade, increments to industrial output per unit of combined inputs have grown very litde in the less developed republics and in some cases have actually declined (secluggish growth of combined factor productivttyarticularly significant problem in Uzbekistan, Turkmenia, and Azerbaydzhan, where industrial output grew at rates helow tbe national average despite the above average growth of combined inputs of labor and capital in these republics. In contrast, the Baltic republics, together with Belo-russia and the Ukraine, experienced the largest increases in combined factor productivity during. Although factor productivity in Georgia grew at the same rate as the nationalery slow growth of inputs curbed the expansion of industrial production.

Table 5

USSR: Combined Factor Productivity in Industry

Absolute Chantce in Combined9

Ukraine

Lithuania

Georgia

Kinrj*

RSFSR

Moldavia

Kat*kfa

i|

Tadahik

ITrbek

.

I'SSH

Kuban of Output per

Unit of Combined Inputs

2

1

O.Gfi

lV

Rank

I;S

A'iNiial Rate ol Growth of FacVnr

Kan I.

rvi

3.4

2.2

I !

3

' n

!

:

0

2.2

Hank

3 7

1!

2 IS

3

1

4

5

Average AnnualGruaili ol Combined

Prrten t

pattern of productivity growth is not particularly surprising. Favorable factors for growth are usually available in areas nl considerable urban-industrial development. Therefore, given an existing spatial distribution of urban-indus-trial development, this distribution could be expected loignificant influence on the regional pattern ol productivitylie reason is that

'reittvs in ibe jndjstrial ttmchuetn:c<oi):il loiol Ihe

t,

namhi's of industry than in other t. Ilt.-tii>iith -heiowins; branches predominate mightigher rate of erawtls of overall factor productivity, tviiiiijvi.atciiiprs In deal with Ihislieol varans indns-tnal branches in most of tbe republics over the8Kwopechyf, "Industrial Loca-licit Polity,"op.lthough his result*elatively higher growth of total factor protludiviiy for some of the less developed republics, KotupeckyJ'sased on ascrace annual rates of changehfferent time period than that covered in Ihis

; ijjni pel nil

heippe.ii to require l! i i-

mi! i"

growth proceeds more cosily in or near already establishedenters due to agglomerationis. economies arising from the concentration of economic activitiesiven area, That such economics arc not trivial can be seen in the continued expansion of industry in the largest metropolitan areas, despite official emphasis on developing the .smaller urbanirst of all. it generally minium less time nnd money to improve and expand existing facilities and to ruinR new plants to full-rapacity operation in regions lhat arc already well developed than it does to build new facilities (including the associated social overhead) in Ihc less developed regions. Also, it is easier lo assimilate lechnnlognai nnd managerial innovations into the mainstream of industrial production in th" already highly developed regions. Thus it is not surprising that the European regions of the country, in which most of the urban-industrial development is cOncenlrated, show lhe highest growth rates of combined factor pioductivity. There is not much evidence lo suggest that diseconomies resulting from overcrowding and rising costs of social utilities as yet outweigh the economics of urban agglomerations.**

IMPLICATIONS FOR SOVIET POLICY Investment Allocations

The regional trends examined in this paper confront Soviet planners and political leadersolityignificant reduction of regionaldifferentials and maximum national economic growth cannot be achieved simultaneously through investment strategy alone. Ii maximum national economic growth is to be the chief criterion for allocating investment, then capital should he directed primarily toward those regions in which it is most productive. But. as the data on factor productivity in Industry suggest, these arc not tlie same regions in which heavy investment allocations would be consistentolicy Orieuted toward achieving regional parity in income. Only with the help of migration policy could all regions move toward income parity, sinee tlvc most rapid population growth is occurring in those regions with the lowest income growth. Significantly increasing the development of labor-intensive branches of industry in the less developed regions, to utilize their rapidly growing supply of "warm bodies" of working age, is not likely toiable substitute for out-migration of labor. Much of lhe growth of able-bodied population in these regions consists of unskilled rural residents whose social and cultural habits inhibit vocational transitions.

Therefore, given the distribution ol opportunities, it is not Surprising thai Soviet investment patterns have not favored consistently those republics with low per capita national incomen the other hand, the evidence is not

" For Instance, the Lithuanian Council ot Ministers recently reported that industrialcontinues lo eipand much wore lapldly in the cities of Vilnius end Kaunas, which alieady accounted foe over one-half of Lithuania's industryhan in the small anil medium-Sire cities of the republic, despite official pleadings to the eontiary. (Iivcjtiya,A* one author puts It,

The continued growth of even ihe laiEeft metropolitan regions In the vvoild contia-dicls tbe ei peeon of diminishing marginal returns to. there is no evidence that metropolitan areas hair ceased to grow anywhere as the result of presumed social diseconomy.egional Developmentase Sludy of Venezuela, MIT,S.)

25

strong ihut productivity was the guiding principle for investmentowever, this may reflect llie lack of any clear-cut methodology and agreed-upon economic criterion for implementing optimum investment policy (not to mention usable pricearticulaily with respect to utdustrial location, rather thankriorityexample, maximizingoth Soviet and Western literature on this subject have repeatedly noted (he arbitrary and inconsistent methods of arriving at location decisions in the USSH and the contradictory criteria often used tn Justify such decisions.1'

Since the Soviets have been unable to implement an investment policyto achieve both regional parity and maximum production simultaneously, it appears from tbe evidence al hand,ak, that actual investment policy may have leaned more toward the latter insofar as planners could deterrnine While this would be consistenthe principle of moving capital resources to the place where they contribute most to production, it cannot solve the problem ol regional national Income differentials. An optimum policy fortoward regional parity mutt combine some capital investment (particularly educational capilal) in the less developed regions with out-migration ol labor from these regions. However, no significant efforts have been made over the past decade either to stem the flow of migration Into Central Asia and the Transcaucaius or to shift labor from these areas to other parts of (be USSR.

Migration Policy

While more stringent control over migration into Ihe less developed legionslear possibility for the future, tbe problem of what to do about the rapidly increasing indigenous population remains. Forced out-migration, (hough possible, does not seem toikely course of action. Aside from the fact that the Turkic population may be unwilling to move and (he "host" Slavicuiircceptivr to such movement, the educational and language constraint lhat prevents most of the Turkic population from entering the skilled labor force, logi'ther wilh the orientation of these people toward irrigation agriculture, warm climates, and large families, makes it unlikely lhat they could readily adapl lo the living conditions and vocational demands in either (he European or Siberian regions of the country. Moreover, (he facilities lo accommodate such tn-migrants are sorely lacking throughout these regions Housing wouldarticularly troublesome problem as wellotential source of friction between the Slavic population and the ncwcomeis. since it is already In short supply und not generally suited to the tradilionnlly large families of the Turkic peoples.

Difficult though il may Im, out-migratiou from Ihe less developed regions may have to be encouraged, and properly accommodated, if lhe Soviets want to

tndaatrUlat cotr*pubbei wKh Ma*

level, of Huliittnal factor. The Kendall rank cadet correUltoa eoWlicBrnt relatinga-arsgr annual itruwth of Industrial new (lied investment In IWIOB to Use level of indmtilal lector prodocnV.ly0he coeflirient relating: the average annual growth of lomblncd inptiti of labut and capital Ino the level of industrial factot productivity0fll

" Uefmie conuseratiorii may alb) wrifrh heavily in invrtfriicnt drritkaii. althoughw Warrerm likery rhat thew eumtderation*innrrlian witb creatine regional party. The irbttnvly large investment allocations tohe leaa doelopwlen'ral Asm na doubt reflect the eaperxaatwn of natural resources at lent ai much at theun of any speutac defenw

" Vaavolod llohibnychy hai prepared an eacnhWt nimmary and bibcioiiaphy on thu point In Spatial f'fficieney in the Sovietlm<rd at the AKA-ASSTK meeting it. New Otieani

avoid, in theseuildup o! minority nationalities of relatively low incomc. At (he very least (as in the case ofhe movement ol indigenous labor from rural areas to selected urban-industrial growth centers within these regions will have to be increased. However, this would require hailing the flow of Slavic in-migrants to these regions, which, as already noted, may prove difficultsignificant changes in current wage policy.

Wans

lan indicators, by union republic, suggest that past development patterns will not change radically over the next five years- The planned growth of national income in each republic, shown inelow, is one piece of evidence. The most rapid growth is planned for Moldavia. Belorussia, Armenia, and Lithuania, followed by the Turkic republics of Uzbekistan, Kazakhstan, and Azerbaydzhan. This growth, if attained, wouldelative improvement in the position of Uzbekistan andwhich grew at below-average rates during.er capita basis, however, much of this planned improvement may be offset by continued high population growth.

In tlie agricultural sector, the largest percenlage increase in productioncompared) is slated for Moldavia, where per capita production duringas already above Ihe national average. Although above-average increases are also planned lor Azerbaydzhan, Armenia, Tadzbiki-stan, and Georgia, it is not likely lhat these inciements will go far toward bringing these republics up to the national average, particularly if no major changes occur in the regional pattern of population growth.

The regional pattern of growth in industry planneds quite similar to that planned foris, the most rapid growth is slated generally for the less developedased on past pei (oimanee, some of these republics, particularly the Turkmen and Uzbek Republics, probably will fall short of the planned growth. The likelihood ol such shortfalls becomes even greater wlien one considers that the planned growth of industria) output must be achieved through significant increases in productivity rather than by large increments to inputs. This indicationrowing pinchavailable resources has been emphasized by the Soviet leadership and it mirrored in the plan data for increases in total capital investment by republics.

The regional plans also suggest that investment per capita in most of the minority national rcpubUcs will probably grow somewhat slower lhanr, nl best, maintain the same rate ol growth. Only in Azerbaydzhan islanned Increase in per capita investment significantly greater than that achieved. The scheduled reductions in per capita investment growth rates arc especially sleep in Ihe Lithuanian, Bclorussian.and Uzbek Republics- Despite these changes in giowth rates, the largest investment allocations per capita will continue to go lo the same five rcpubUcssndTurkmcnia. Latvia, the ItSI'SH. and Kazakhstan (see. Thus it appears that no major shift in the regional distribution of per capita investment is contemplated.

lthough plan data for lhe economicl tic KSI'SH ans almostthegiowth of industrial production In Siberiathe Farn repotted toational average.

27

CI

Similarly, no new policies with respect to interregional labor transfers have beeniphasis remains primarily on wage differentials ai an Incentive (or labor tn migrate into the Siberian regions However, this policy has enjoyed only minor succesi for Siberia in the past. In fact, the lack of sufficient regional wage differentials, as discussed earlier, ha* drawn labor into theern regions. Although there has been some recognition of Ihe need to increase these wage differentials, it is unlikely that any immediate increases willignificant transfer of tabor to Siberia and the Far East during the next five years.

Since the new five-year plan gives no prospect of reducing regional income differentialsoordinated redistribution of both capital and labor, regional disparities in development levels are likely to persist with little change during the new plan period- In fact. If industrial growth must depend primarily onin factor productivity, tbe development gaps may continue to Increase, with the leu developed republics falling still further behind the rest of the country.

3d

APPENDIX A

4 1.

i

i

4 1

I 1

illllilllllllililllllll

illlliiilliiiiiiiliiili

ffliliUlfllllllllllili

mmmmmmm

JlllillilillliJi

li!

mill tlllMl

11isits

I

i ili

nip niijjjll

11

Regional Per Capita Values of National Income, Industrial Output, and

Agricultural

Agricultural

National Income * Industrial'

Chernorem...

Valley

Caucasus

Siberia

Siberia

East

i6l

i

drhan .

.

i

S. The per capita data fur natji.tnil incTumc ahiiwn here and inl :hcderivedfollow* FiiSt.momc per capita for the USSR wa* derived5 by moving6 value ol nnlii.imle appropriate

v i iii'. . r.'iy- kliozvsit SSSR v

odu,nd Narodnoye kboiyaytdoodu. p.epublican data on national income per capitaercent of the USSR58 prices) r'-iiioini'd iii Vvdahchnv, op.ere the" npp'.ied I" the USSRFromesults, national income wa* derived, fur each republicnd lhe latter0 and .'orwjrd9 by lhe appropriate growiii(Naradnoye khoiiBrsdiiodu,inally, uting; mid-year population dataapim national& ealeiilaled for each republic in ISiiO and

V Theiui da la for industr.id miiain.here snd inl the led ncre derived from the gios> valueindustrial outpuihe USSR05 prices.yah lennogf SSSR.Hlul. p.id lhe regional pel rentage shares of Ihis viinl figure (originally derived,The Aii.iiirimUa^wi and Dir.trJbj lion ijt Sviietu USommitimensinns of Soviet Economic Power.'Mi2 pp. ?otdjja'.ed Inr boundary

- i ; up. ell..

' i'im il :i |. i I.

.

Kaliningrad Obiaul".

34

SSR; Mid-Year Popiilalion

Trjuiaid rWbvu

Chernoiera

Valley

Cauoacu*

Siberia

Siberia

Eatt

.-i!

BI

-

.

.WO

fit

MM

from 3iu.0

|Mb, p-nd Narodnoye khoiyayatvo0 todu,aHtadans fcalirwurrad Ohio..

USSR: Indcirt of Crotvlh ol" Man-Hour* Worked per Year in Indutfry 1

F-'linU

LaMe

Lithuania

9

Axerbavdahan

Tuihaen

Based on employment <lala. days worked pet man-year, and hour* workrt! pa* roan-day Thc-i* data averc riliarted bomSSR.. SI., end Narodnoye.0 tr-lu,

USSR: Indexes of Growth of Indiistrial Fixed Capital Slock (End of Year) *

USSR

nsfsa

Ukraine .etonnaa Moldavia

:-

Kite*

Ceorpa

Aa ydihan

Armenia .

Tnibnen uareei:

USSH: Xarodiwye ktioryayatvo9 eodu.SFSK: Narodnoye9 eodu,kraine: Narodnoye khoirar.tvo Ukaintkoy9 godu,clomafa: Narodnoye HvniyaytOoodu,oldavia: Narodnoye hhoryayitvo Mnldav.fcn*5 godu.

Sovelikara0 letiyu Vt Ulnae.triujanU:iil'lura li tonic ti)

atvia-oTcurBt.arodnoye

Uwirartvo Sovetikoy larvaI MMatoaU: Narodeayye Maaeyayatvaodo.rmenia- luukyaa. CD. Oanavne laadytLraarnii Axnryanakey

. (JrbefeOan NaradaoyerWkiio. SSH19C7* KirCcia. Narodnoye kbonayatva KireUikoi SSR19n7 aodu.adzhik: Neiodnoye5 Rodu.All tndaet baaed5 ruble*.

" Alln parrnlheariint I'ddeiivrd by the perpetual inventory method at explained In lite leat ol Appendii B

30

APPENDIX B

DISCUSSION OF STATISTICAL AND ANALYTICAL PROCEDURES The Effect of Soviet Statistical Biases on Interregional Comparisons

Tho statistical data on national income and industrial output employed through' out this paperen drawn exclusively from official Soviet sources and are subject to the biases inherent in Soviet concepts and statistical practices. Although the regional biases do not differ sufficiently toignificant change in the relative position of the regions, some regional differences in statistical bias still exist. These differences and their probable effect on the results of Ihis paper are discussed below.

National Income Data

In Soviet practice, national income reflects the total net product of thesectors of the economy. This differs from the Western concept of net national product primarily in Ihe exclusion of Ihe service and government sectors from the Soviet data. The exclusion of services very likely has resulted in Ihe underestimation of regional variations in per capita national income, since the value of services per capita is considerably greater in the European areas of the country than in lhe Central Asian and TranScaucasian republics.80

Probably the greatest degree of regional variation in the bias of national income data is due to Ihc inclusion of turnover lax in the net pioduct olhis introduces different degrees of bias among the regions according to the branch stmctiue ol industry in each region, due to variations in the amount of turnover tax applied to different products. Forhe turnover tax com-puncnt of wholesale prices% in the branches of heavy industry and 2Zi% in Ihe branches of the light and food industries.'8 Thus, national income could be subject to more upward bias in regionsreater share of light and fond industries in Iheir industrial structures.omparison oi the relative positions of the union republics in terms of per capita national jnuomenclusive and exclusive of turnoverevcab that regional variations in the bias resulting from inclusion ol Ihe turnover lax do notchange the ranking of Ihc republics (seend have virtually no eflect on the findings of this paper, with respect to regional variations in the level of per capita national income.

or dimple, (he (lain given for personal services0 Kodu,, imJcHles lhat (he value of such services per capita ranges fi.imubles In Aaeibaydzhanlx'laitan louble* In Estonia-

"Th- turnover la> incidenceesult of bidder prattler rather than production relations,istribution of net products, by sector, iiiehdlnv. turnover tax distorts lhe actual situation.

"Narodnoye khofyaystvo9 godu,.

" Prr tapila national income data exclusive of turnover lax5 were obtained from Vcdislirhev. op..

37

USSR: Ranking of Republics, by Per Capita National Income, Inclusive nnd Exclusive of Turnover5

Inclusive of Turnover Tax

of Turnover Ta*

Average

AvrrtKe

zerhay dxhan

urkrnen

indexes of national income growth are also affecled differently, depending on Ihe branch slnicture of industry in each region. Since Ihe light and food industries generally experience slower growth than heavy industry, regionsreater sham of the former in their industrial structures will naturally display slower growth rates of national income. The turnover tax element in the net product of the light and food industries exaggerates the weight of these branches and therefore causes an understatement of economic growth. Nevertheless, the relative rates of industrial growih, by region, should not be affecled appreciably by the inclusion of Ihe turnover tax.

Industrial Output Data

The sector defined as industry includes manufacturing (includingining, electric power generation, lumbering, and fishing. The official production indexes extracted from the statistical handbooks of the L'SSH and lhe RSFSR, arc indexes of gross industrial production {valoveya produktelyahese indexes represent the sum of the gross production of all industrial cntcr-piises, where the gross production of each enterpnsc is calculated by multiplying the output of each product by its price (excluding turnover taxes! asase year- Only those products produced by an enterprise solely for internal use in the production of its primary products are excluded from lhe groan production of an enterprise.*'

These indexes are subject to several defects when used to estimate growth. Multiple weights will be assigned lo some industrial activities due to interindustrynd il those activities are growing faster than others that arc less heavily weighted, the index will be overestimated. To (he cu-nt that this occurs, regions with relatively greater concentrations ol technically related industries (that is, Ihe European regions) mayelatively greater inflationary bias in growth. Another defect is that lhe indexesii*iiive lo changes in the organizational structure of industry. As the degree ol specialization increases,

" Narodnoye khoryaysivo7 eodu,.

38

Ihe number of independent enterprises and'-.its. and with thorn Ihe gross value ol itidiislnal production, will increase. Thus. increases in (he grass value of industrial production5 may In .some extentefU-clnin ol Ihe abolition of the councils of national economy and the return to the branch system of administration.

The giealesl inflationary delect o! these indexes is probably the method by which new products are introduced into the indexes. New pioducts and modified or improved old ones arc assigned prices ostensib'y equivalent lo prices that would have existed in the base year. In praclice this fcfis usu.iilvhe initial unit cost of production, which is generally very high and includes developmental expenses. This practice, coupled with the tendency of new products to grow more rapidly in output than older ones, may cause greater Inflation of the growth nates of industrial production in the European regions of the country where conditions are more conducive to the tnti oil notion of new products.

There is little doubt that some of the regional variations in both the level and growih ol per eapita industrial oulput arc attributable to the piohlcrm discussed above. However, the regional variations in industrial product ion seem far too great to be explained predominantly by variations in statistical bias.

Dorivotion of Induslriol Inputs and Combined Faclor Productivity The Input Series

Perhaps theerious deficiency in Ihe analysis is the lack of ^equate regional data on factor inputs other ihan lahor and capit.il. There dees not appear to be any tractable method of imputing inputs from other sectors,agriculture, to the industrial sectoregional basis.airly detailed input -output table exists fur tbe countryhole, there is no reason to expnil that the ceelricienls would realistically repiesenC thef individual regions, and use of these coefficients would probably compound the existing margin of error.

Indexes of labor services

The indexes of labor inputs arc based on published Soviet data: the average annual number of wage earners and salaried personnel in industry, the aveugi: number nf Jays worked per man-year in industry, and the average number of hours worked per man day. Dala on hours worked per man-day and days worked per man-year are available only for the USSitholead to be assumed relevant for each region. To the extent that tins assumptioniolated, the indexes of labor inputs are not fully comparable with ihose of initnuE. Another pioblem ofb ing the coverage of inputs ami outputs occurs in the labor series because of the exclusion of industrial workers participating in minor industrial production activities on collective farms whose output is included in the indexes of industrial production.1"

Indexes ot induslriol gross fixed capital stock

Data on the growth of industrial gross fixed capital stock, by union republic, were obtained both directly from Soviet statistical sources and indirecCy Irom

SSR,H.

39

of tlV ruble value of industrial gross fixed capital Mocky the perpetual inventoryonceptually, those indexes arc Less desirable as surrogates for the growth of capital services than indexes of average annual gross fixed capital stock would be, since the indexes presented here represent stock as of tlie end of tho year. However, in tho absence of firm data nn the annual ruble value of industrial gross fixed capital, by republic, from which indexes of average annual gross fixed capital stock could be derived, th" nnd-ob year indexeseasible alternative for Indicating tbe relative order of magnitude in the growth of capital services among the union republics. Tbe growth indexes of industrial grots fixed capital stock590 as the base year) are presented in. Those in parentheseslucs estimated by the perpetual inventory method-Four basic Steps were followed in obtaining the estimated indexes. First, estimates of the ruble value of industrial gross fixed capital stock at the end0 were derived as shown tn. For each republic exceptrbaydzhan, Kazakhstan, and Turkmenia this value was moved forwaul by the reported growth index to the most recent year for which the index was given. Tbe perpetual inventory method was then applied lot (he remaining years touble value of industrial gross fixed capital slock at the end

Nu growth indexes were available forrbaydzhan, Kazakhstan, and Turkmenia. so the perpetual inventory method had to be used for all yean. Because republic data on the changes in unfinished construction were not available, the perpetual inventory method tends to overstate somewhat the growth ol industrial fixed capital stock each year The stock of unfinishedtypically grows fatter than totalus. when the values of industrial fixed capital stock were summed fcr all republics at the endhey4 bilhon rubles,illion dibits more than tbe reported total for the USSR. On the assumption that the reported growth indexes for the otherepublics were accurate, this error was attributed solely to the estimating procedure, and Ihe four estimated valuesG5 wnrusted proportionally to add to the dilferencc between lhe sum of thet-public* for which dalaorlrd and the totaltho USSR. Starting liom th-sc adjustml values, the perpetual inventory method was again appliedhe sum of all republic values at the end93 b'llion3 billion rubles over Ihe reported total for the USSR. Therefore, tlie cstimater! values were ad-juited as tWnrc. and indexes of growth were tlien nkvtatodl fiom ratios of the adjusted values to0 values.

In ,'idiliiion to the lack ol data on changri in "iil-nUlied constructionabuve. two other factors associated wilh llie perpetual inventory method may banW affected the accuracy of lhe edirulo Sne rctiieincnt rale* for indoMnal run) capital stock, by republic, were notll unionrales were applied in lhe values of iiaiuUital irruss fixed capital flock of cmublic. Second, industrialtn" rtrpubltcs (and

veiial inveiiinry method canS,Ji

ala-ie

V.iaed ca|HUlatIkeI.

f tetaewiBTai la theltiima dw yeart^<ni caiatal tlwek al theef ihr

40

3 d

S2

:t *

e -

G -

2&

III

i oei o

ca

, flj CI

y.-A'A'Z, Z . z

liillil^iil

1-

for all republicsad in be estimated by first calculating tho average percentage share of industrial investment in total investment over the previous period ni five to eight years and then applying this bgure to lolal investment for the yeaifs) in question. Although the extent ol any error intioduced by these procedures is unknown, it is not very likely that any such error could appreciably distort the relative older of magnitude of industrial capital stock among ihe republics.

The Relotion of Inputs to Ourpufs

'lhe production function used to combine Ihu labor and capital inputs is Ihe familiar Cobb-Douglasl.'K'.. Because it is believed that neither perfect nor zero substitutabilily among inputs is reasonableector as compiehonsive as industry, an intermediate assumption seemed lo be called for. Therefore, the assumption of unitary elasticity of substitution was made for this analysts.

In estimating the production function coefficients, it was assumed that labor and capital inputs were paid the value of their marginal products in the base year; and, for each region, the shares of labor and capital in total value added in industry were derived exogenoosly Irom the product ionan. The average, annual wages of workers and salaried employees together with social insurance deductions were taken to reflect the values of the marginal pioduil of laboT. Since there was no explicit accountingeturn to capital in the Soviel Unionhe somewhat arbilrarvale ofas assumed .w!t;vapital This combined rate was applied to all regions. Tlie interest rate ofhs chosen on the basis that it is one of the two rates employed in previous studies of this nature (Ihe other) and is closer to the experimental Q% rate instituted by lhe Sovietshan isale. Tlie specific steps followed in deriving the production fuuetion coefficients are outlined in the notes to

12

Original document.

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