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Was Stalin Necessary for Russia's Economic Development?

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

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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19425.

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Date of creation: Sep 2013
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Handle: RePEc:nbr:nberwo:19425

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References

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  1. Berthold Herrendorf & Richard Rogerson & Akos Valentinyi, 2011. "Two Perspectives on Preferences and Structural Transformation," IEHAS Discussion Papers, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences 1134, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
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  13. Fumio Hayashi & Edward C. Prescott, 2008. "The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 116(4), pages 573-632, 08.
  14. Eugenia Chernina & Paul Castaneda Dower & Andrei Markevich, 2010. "Property Rights and Internal Migration: The Case of the Stolypin Agrarian Reform in the Russian Empire," Working Papers, Center for Economic and Financial Research (CEFIR) w0147, Center for Economic and Financial Research (CEFIR).
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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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