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Was Stalin Necessary for Russia’s Economic Development?

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  • Cheremukhin, Anton
  • Golosov, Mikhail
  • Guriev, Sergei
  • Tsyvinski, Aleh

Abstract

This paper studies structural transformation of Soviet Russia in 1928-1940 from an agrarian to an industrial economy through the lens of a two-sector neoclassical growth model. We construct a large dataset that covers Soviet Russia during 1928-1940 and Tsarist Russia during 1885-1913. We use a two-sector growth model to compute sectoral TFPs as well as distortions and wedges in the capital, labor and product markets. We find that most wedges substantially increased in 1928-1935 and then fell in 1936-1940 relative to their 1885-1913 levels, while TFP remained generally below pre-WWI trends. Under the neoclassical growth model, projections of these estimated wedges imply that Stalin’s economic policies led to welfare loss of -24 percent of consumption in 1928-1940, but a +16 percent welfare gain after 1941. A representative consumer born at the start of Stalin’s policies in 1928 experiences a reduction in welfare of -1 percent of consumption, a number that does not take into account additional costs of political repression during this time period. We provide three additional counterfactuals: comparison with Japan, comparison with the New Economic Policy (NEP), and assuming alternative post-1940 growth scenarios.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9669.

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Date of creation: Sep 2013
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Handle: RePEc:cpr:ceprdp:9669

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Keywords: industrialization; Japan; Russia; Stalin; unbalanced growth;

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  1. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2011. "Finance and Development: A Tale of Two Sectors," American Economic Review, American Economic Association, vol. 101(5), pages 1964-2002, August.
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  10. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
  11. Andrei Markevich & Mark Harrison, 2010. "Great War, Civil War, and Recovery: Russia’National Income, 1913 to 1928," Working Papers w0146, Center for Economic and Financial Research (CEFIR).
  12. Wei Li & Dennis Tao Yang, 2005. "The Great Leap Forward: Anatomy of a Central Planning Disaster," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 840-877, August.
  13. Ellman, Michael, 1975. "Did the Agricultural Surplus Provide the Resources for the Increase in Investment in the U SSR During the First Five Year Plan?," Economic Journal, Royal Economic Society, vol. 85(340), pages 844-63, December.
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  1. Was Stalin Necessary for Russia’s Economic Development?
    by Christian Zimmermann in NEP-DGE blog on 2013-10-06 03:10:44

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