Working Paper: CEPR ID: DP9669
Authors: 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.
Keywords: industrialization; Japan; Russia; Stalin; unbalanced growth
JEL Codes: E6; N23; N24; O4; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Stalin's economic policies (1928-1940) (P21) | welfare loss of consumption (24%) (D69) |
| welfare loss of consumption (24%) (D69) | reduction in welfare of representative consumer (1%) (D11) |
| Stalin's economic policies (1928-1940) (P21) | long-term welfare gain (16%) post-1941 (D69) |
| structural transformation of economy (O14) | future growth (O49) |
| Stalin's economic policies (P35) | observed decline in wedges after 1936 (N12) |
| Stalin's policies (P35) | Soviet economy performance comparison with Japan (P27) |