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Was Stalin Necessary for Russia’s Economic Development?

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

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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  1. Ofer, Gur, 1987. "Soviet Economic Growth: 1928-1985," Journal of Economic Literature, American Economic Association, vol. 25(4), pages 1767-1833, December.
  2. 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 w0147, Center for Economic and Financial Research (CEFIR).
  3. 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).
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  12. 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.
  13. Yongseok Shin & Joe Kaboski & Francisco J. Buera, 2008. "Finance and Development: A Tale of Two Sectors," 2008 Meeting Papers 955, Society for Economic Dynamics.
  14. Aubhik Khan & Julia K. Thomas, 2011. "Credit Shocks and Aggregate Fluctuations in an Economy with Production Heterogeneity," NBER Working Papers 17311, National Bureau of Economic Research, Inc.
  15. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers 597, Federal Reserve Bank of Minneapolis.
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  17. 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.
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  19. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, June.
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