IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

The Soviet economic decline : historical and republican data

  • Easterly, William
  • Fischer, Stanley
  • DEC

Soviet growth for 1960-89 was the worst in the world, after controlling for investment and human capital. And relative performance worsens over time. The authors explain the declining Soviet growth rate from 1950 to 1987 by the declining marginal product of capital. The rate of total factor productivity growth is roughly constant over that period. Although the Soviet slowdown has conventionally been attributed to extensive growth (rising capital-to-output ratios), extensive growth is also a feature of market-oriented economies like Japan and Korea. One message from the authors'results could be that Soviet-style stagnation awaits other countries that have relied on extensive growth. The Soviet experience can be read as a particularly extreme dramatization of the long-run consequences of extensive growth. What led to the relative Soviet decline was a low elasticity of substitution between capital and labor, which caused diminishing returns to capital to be especially acute. (The natural question to ask is why Soviet capital-labor substitution was more difficult than in Western market economies, and whether this difficulty was related to the Soviets'planned economic systems.) Tentative evidence indicates that the burden of defense spending also contributed to the Soviet debacle. Differences in growth performance between the Soviet republics are explained by the same factors that figure in the empirical cross-section growth literature: initial income, human capital population growth, and the degree of sectoral distortions. The results the authors got with the Soviet Union in the international cross-section itself was disastrous for long-run economic growth in the Soviet Union. This point may now seem obvious but was not so apparent in the halcyon days of the 1950s, when the Soviet case was often cited as support for the neoclassical model's prediction that distortions do not have steady state growth effects. Since a heavy degree of planning and government intervention exists in many countries, especially developing countries, the ill-fated Soviet experience continues to be of interest.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1284.

in new window

Date of creation: 30 Apr 1994
Date of revision:
Handle: RePEc:wbk:wbrwps:1284
Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1284. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.