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76-24,628

KING, Arthur Eaton, 1949- AN ECONOMETRIC MODEL OF A SOCIALIST ECONOMY: CZECHOSLOVAKIA.

The Ohio State University, Ph.D., 1976 Economics, general

Xerox University Microfilms , Ann Arbor, Michigan 48106 a n econometric m o d e l o p a

SOCIALIST ECONOMY: CZECHOSLOVAKIA

DISSERTATION

Presented in Partial Fulfillment of the Requirements for

the Degree Doctor of Philosophy in the Graduate

School of The Ohio State University

By

Arthur Eaton King, A.B.f M.A.

The Ohio State University

1976

Reading Committee: Approved By

Dr. Josef C* Brada

Dr. Warren W. Eason

Dr. Wilford L, L'Esperanee

/ Adviser i /S Department of Economics ACKNOVLEDGZKZNTS

I would like to thank the members of my dissertation committee,

Professors Vilford L, L'Esperance and Warren W. Eason, for their com­ ments and criticism on earlier drafts of this study* I am grateful also

to Professor George J. Demko who provided the raw migration data as well

as valuable suggestions which ultimately lead to the demographic appli­

cation in Chapter 17* Two persons deserve special recognition for their

technical and personal assistance. I would like to acknowledge the many

hours Professor Josef C. Brada, my adviser, has spent with me criti­

cizing and discussing every phase of this study. Finally, I am indebted

to my wife, Chere, for typing the drafts.

ii VITA

September 29, 1949 • • Born - Boston, Massachusetts

1971 ...... A,B., Economics, Middlebury College, Middlebury, Vermont

1 9 7 3 ...... M.A., Economics, The Ohio State University, Columbus, Ohio

1975-1975*••■••••• Economist, Midwest Econometrics, Inc., Columbus, Ohio

1976 Teaching Associate, Department of Economics, The Ohio State University, Columbus, Ohio

AREAS OP SPECIALIZATION

Econometrics (The Ohio State University)

So vie-; and Eastern European Economics (The Ohio State University)

Economic Theory (The Ohio State University)

Regional Economics and Econometrics (Midwest Econometrics, Inc,)

PUBLICATIONS

Articles

"The Soviet-American Trade Agreements: Prospects for the Soviet Economy," The Russian Review (October, 1973), Vol. 32, No. i*, pp. 3U5-59 (with J. BradaJ.”

"The Age Distribution of Ohio's Manufacturing Plant and Equipment, Tart I," Bulletin of Business Research, The Ohio State University, Vol. 50, No. U, April, 1975 (with W. L. L'Esperance).

iii. "The Age Distribution of Ohio's Manufacturing Plant and Equipment, Part II," Bulletin of Business Research, The Ohio State University, Vol. 50, No. 5, May, 1975 (with W. L. L'Esperance).

Monographs, Research Reports and Government Reports

"The Role of Expectations in Economics: A Quantitative and Quali­ tative Analysis with an Bnpirical Example," Honors Thesis, Middle­ bury College, 1971.

"Property Rights and Investment in Human Capital by the Labor- Manged Firm," with J. Brada, Division of Economic Research Report 7307, Department of Economics, Ohio State University, February, 1973*

"A Critical Review of the 'State of the Art' on the Linkages Among Societal, Ecological, Geographical and Economic Regional Models," with W. L. L'Esperance and A. M. El-Mokadera for Battelle Columbus Laboratories, August, 1973*

"The Specification of an Econometric-Land-Use Model," with W. L. L'Esperance for Battelle Columbus Laboratories, September, 1973-

"The Age Distribution of Plant and Equipment of Firms in Ohio," with W. L. L'Esperance for the Department of Economic and Com­ munity Development, State of Ohio, October, 1973.

"The Tax and Financial Incentives for Doing Business In Ohio," with W. L. L'Esperance, G. Biddle, and G. Jenkins for the De­ partment of Economic and Community Development, State of Ohio, October, 1973.

"The Outlook for the Ohio Economy in 197U," with W. L. L'Esperance, D. E. Jones, G. C. Biddle and C. L. B a m u m for the Department of Economic and Community Development, State of Ohio, March, 197h.

"A Review of the State of the Art of Regional Econometric Model Building," with W. L. L'Esperance for the Center for Human Re­ sources Research, Ohio State University, Columbus, Ohio, April, 197U.

"Projections of Population, Employment, Personal Income, Personal Savings, Total Deposit Potential, Bank Deposits for All Ohio Counties," with W. L. L'Esperance for The BancOhio Corporation, Columbus, Ohio, April, 1975*

Data Directory (of the Ohio Economic Data Bank), with W. L. L'Esperance, Midwest Econometrics, Inc., Columbus, Ohio, May, 1975.

iv TABLE OF CONTENTS

Page ACKNOWLEDGEMENTS...... ii

VITA ...... iii

LIST OF TABLES viii

LIST OF FIGURES...... v

INTRODUCTION ...... 1

Chapter

I. THE ECONOMY OF CZECHOSLOVAKIA 1948-1972. . . 7

Introduction ...... 7 An economic history of Czechoslovakia. . . 7

II. THE CZECHOSLOVAK ECONOMIC DATA BASE...... 52

Introduction ..... 52 Data requirements of the C E M ...... 55 The Czechoslovak national income accounts. 55 Introduction ...... 55 Material versus nonmaterial production . 56 Social product and national income . . . 58 Problems with the d a t a ...... 68 Introduction ...... 68 General sources of data problems .... 68 Definitional problems...... 71 Quality problems ...... 75 Specific problems with Czechoslovak data 74 The problem of missing data...... 78 Introduction 78 Extrapolation, distribution and interpolation...... •••■•• 77 The solution by relatedseries ..... 78 Description of the CEDB. 84

III. THE CZECHOSLOVAK ECONOMETRIC MODEL ...... 99

Introduction...... 99 Overview of the CSH...... 99 Identification of the equations...... 103 The equations...... 108 v Government ...... • . . 109 Foreign trade...... 114 National income or net material product (production) ...... 116 Employment...... * ...... 119 Demography...... 121 Personal income and wages...... 124 Consumption and savings...... 128 Evaluation of the structural equation estimates ...... 152 Introduction ...... _£ ..... 132 Single equation evaluation: R and IW. . 132 Systemic evaluation...... 135

IV. THE REDUCED FORK OF THE CEM AND ITS APPLICATION ...... 155

Introduction ...... 159 The reduced form equations of the CEM. , . 160 Application 1: Forecast of endogeneous variables 1973-1980...... I69 The problem...... 189 The method ...... 170 Results...... 177 Application 2: The assumption of no 19&7 reforms...... 179 The problem...... 179 The method ...... 179 Results...... 181 Application 3* The effect of lowered levels of manufacturing investment . . . 18J The problem. 185 The method I84 Results...... 188 Application 4: A change in population location...... 191 The problem...... 19^ The m e t h o d ...... 193 Results...... 196

CONCLUSION...... 207

LIST OF REFERENCES...... 218

Appendix

A. THE CZECHOSLOVAK ECONOMIC DATA BASE...... 230

B. DATA SOURCES * . . 305

C. RELATED SERIES AND REGRESSION EQUATIONS USED TO ESTIMATE KISSING DATA...... 308

vi D. T.M'L’ STHUCTOfUL ESTIMATES, DPPINITIOiTG OP VARIABLES CHOSS-Bitf’Z'ZNOZD TO AZPZZDIX A . 318

vii LIST 07 TA3L2S

_o Page 3.1. Pattern of H ...... 133

3.2. Inconclusive Durbin-Watson Test Statistics* . 136

3.3* Comparison of the CEM with Other Econometric Models* •••»...... 137

4.1* Matrix of Reduced Form Coefficients . . . • • 161 o 4*2. Q Values for Comparison of Actual and Estimated Values of the Endogeneous Variables *••••*.*•••••*•• 165 2 4.3* Ranking by Q for Actual Versus Estimated Values...... ••*•*•• 166

4.4. Forecasts of the Exogeneous Variables, 1973-1900 ...... 171

4.5. Alternate Forecasts of Selected Endogeneous Variables, 1973-1900...... 178

4 .6 . Simulation under the Assumption of no 19^7 Reforms: Summary of Selected Aggregates . . 182

4.7. Comparison of Czechoslovak and French Manufacturing Investment ...... 185

4.8. Czechoslovak Investment and Capital Stock with the French Proportion Imposed. .... 187

4.9. Simulation with the French Proportion Imposed Imposed: Summary of Selected Aggregates . . 189 4.10. Alternate Rural Population and Required Target Values for Infrastructural Investment 194

4.11. Control Values of the Policy Instruments . . 197

4.12. Simulation of the Population Shift with Controlled III and IA: Summary of Selected Aggregates...... 199

viii LIST OP FIGURES

Page 2.1. National Income Originating by Economic and Social Sector...... 62

2.2. Primary Distribution of National Income by Economic and Social Sector...... 63

2.3. From National Income Originating by Industry to the End Uses of National Income...... 64

3.1. Relationships among Equation Blocks Grouped by Economic S e c t o r ...... * . . ... 101

3.2. The Causal Ordering of the CEM...... 105

ix INIRODUCTIOK

For more than twenty years, Western economists and econometri­ cians have been constructing econometric models for capitalist market economies and have developed considerable expertise in applying such models.^ However, socialist economists have begun only recently to build econometric models for their centrally directed economies. This 2 late start was primarily due to ideological barriers which were over­ come in the late 1960*s with the more open discussions fostered by econ­ omic reforms. Some of the more conservative Central European economies which follow the strict, traditional Soviet development model still have no econometric models. Both §ujan and Kolek. [129] and Shapiro and 3 Halabuk [117] provide extensive reviews of the econometric modeling efforts undertaken to date in Central Europe,^ mainly in Poland, Hun­ gary , the German Democratic Republic and Czechoslovakia.

In the broadest sense, econometric models Include not only

those with stochastic mechanisms but also those which are purely mathe­ matical, i.e., deterministic. Moreover, many models having stochastic

aspects do not involve the estimation of parameters. However, in this

study the definition of an econometric model is narrowed by eliminating

deterministic models and models not requiring estimation from the do- main of econometrics. The exclusion of these two classes of econometric

models la more in keeping with practice in the United States, which

categorizes these models under economic theory or operations research. 2 than with European practice which has tended to maintain greater unity 5 in this area.

For the purposes of this study, an econometric model is defined as a description of interdependent or recursive macroeconomic relations in the form of a simultaneous system of equations:

Bjr. + Gji ■ ju where

2 ■ n x 1 vector of endogeneous variables

■ m x 1 vector of exogeneous and predetermined variables

u * n x 1 vector of erroxsor disturbances

Both B and G are matrices, respectively n x n and n x m, of empirically determined coefficients. One of the major advantages of this type of model for describing an economy is its economical data requirements.

This is particularly important for Vestern econometricians who have en­ countered serious problems with the availability of data on centrally planned economies. Econometric models are valuable tools for planning and policy-making because they can be used both for forecasts of possible

future economic developments and for retrospective exercises, studying the effects of previous policy options or alternate changes in the econ­ omic environment. Other advantages and uses of econometric models are discussed by Klein [SO], [81], Glickman [52], [54], Adams and Rowe [4],

£ L'Esperance, et. al. [91], and firada [23].

The above equation system describes the structure of the economy

and thus Is called a system of structural equations. The reduced form,

or reduced form equations, is derived by algebraic manipulation:

^ - B-1Gi + B ^ u 3

The n x m matrix B” *G consists of the reduced form coefficients which are Interpreted as Impact, interim or total multipliers (see Thell

[131] pp. 463-465). Those exogeneous variables controlled by the cen­

tral planners can be manipulated to simulate the effect of alternate policies on the eudogeneous variables* Also when forecasts of the exo­ geneous variables are available, their substitution into the reduced

form produces forecasts of the endogeneous variables.

The basic objective of this study was to formulate an operational econometric model of Czechoslovakia, a mature Industrial economy which,

since KWXI, has developed by means of socialist central planning methods.

The estimation of the structural equations of the model required compila­

tion of a time-series data base from available sources. In many In­

stances, only partial data aeries were available; an econometrically

sound method was devised to solve this problem. After the model's para­ meters were estimated, the model was applied to solve several economic problems, requiring forecasts and policy analyses.

Chapter 1 presents an overview of important economic events and

developments in the Czechoslovak economy since the inception of central

planning. The primary purpose of this chronology or economic history

is to give the reader a perspective view of the institutional framework

that the model seeks to capture.

In Chapter II, problems encountered in constructing the Czech­

oslovak Economic Data Base (CEDB) are discussed. Separate subsections

describe the data required for the econometric model, the Czechoslovak

scheme of national accounts, general and specific problems with the

use of socialist data and the above mentioned solution to the problem 4 of incomplete series. Finally, the data listing of the CEDB is pre­ sented and explained.

In Chapter III* prior to the presentation of the equation esti­ mates, the identification of each equation of the model is examined and on this basis a particular estimator chosen. Additional explanation, beyond the historical overview of the economy in Chapter 1, is provided for the specification of each equation and for the more important coef­ ficient estimates. The structural equations of Czechoslovak Econometric

Model (CEM) are evaluated and compared with existing econometric models

Including the two annual Czechoslovak models, W S 1 [127] and W S 2 [130].

In Chapter IV the reduced form of the CEM is evaluated and used for forecasting and for three counterfactual historical simulations.

Annual forecasts of the endogeneous variables were made beyond the esti­ mation period to 1980. The simulations were based on assumptions of possible alternate development paths which could have chosen by the cen­ tral planners. These retrospective and forecasting applications of the

CEM are only a few of many possible uses of the CEM. The particular problems solved have intrinsic economic Interest per se and illustrate techniques for applying econometric models to policy and planning prob­ lems. NOTES TO THE INTRODUCTION

The initial Klein-Goldberger model of the U.S.|_82] was developed in 1955. Since that time many models for the U.S. have been constructed, e.g., see Nerlove L104]. Many of these models have existed for a long enough period to allow extensive evaluation of their properties and forecasting ability, e.g., see Hickman

|_67]. Most western industrial nations now have at least one econometric model describing their economy, e.g., see Shapiro and Halabuk [111] , Adams, et. al.f [$], or Jacobsson (_75]« Sub­ national models, primarily hindered by lack of available data, have been constructed more recently, e.g., see the reviews by

L'Esperance and King j_90] or Glickman i_54je

Most socialist econometricians include a discussion of the ideological worthiness of econometric models in papers or pub­ lications describing their models. For example, see Sujan

L1 27D. See also Rumbler [ll6j* Letiche |_92l, and Brada[^23j.

While both review specific models, Sujan and Kolek concentrate on the chronological development and on the influences of one socialist model in the development of others. On the other hand, Shapiro and Halabuk compare socialist econometric models with existing western models within the broader context of general problems of econometric modeling. Moreover, because of the authors' nationality, Sujan and Kolek discuss Czechoslovak nod.?Is in greater detail and Shapiro end Halabuk emphasize the

Hungarian experience.

With the exceptions of the model of’ the Soviet Union [59] ?

[93] developed at the University of Pennsylvania and the model of Czechoslovakia in this study, no macroeconomic models for entire centrally planned socialist economies have been con­ structed in the Westc Vafious [.140] had begun a model for

Czechoslovakia, but was hampered by data availability.

Brada and King [_24] » p. 1. See for examples of the Central

European practice, Ambartsumov [_8] and Mikhalevsky [99].

Theoretical issues involved in constructing econometric models for socialist economies are discussed by Klein 1.79] » Brada [23] and Brada and King |_ 24J • CHAPTER I

THE ECONOMY OF CHECHOSLOVAKIA 1948-1972

Introduction

This chapter describes the major economic trends and Institu­ tional changes which have occurred in Czechoslovakia. Because the econ­ ometric model is based on time series data and because its specifica­ tion Is based on the evolution of Czechoslovak economic institutions, this chapter provides a framework for the evaluation of the equations and parameter estimates of the model.

An Economic History of Czechoslovakia

Since the major objective of this study is to model a centrally- planned socialist economy, this chronology begins in February, 1948, when the Communist Party took control of the economy•^ They Inherited a system which was in mid-recovery from WWII, was already half natlon- 2 allzed and had some experience with central plans and planning. The

Communists extended nationalisation to cover all firms with 50 or more employees as well as the communications industry. By 1949, 96.4 per­ cent of all industrial workers were employed in the socialist sector.

Retail trade was not overtly nationalised; supplies of goods were di­ verted to nationalized shops and cooperatives, gradually forcing all private shops to nationalize or close. The nationalisation drive was A not pressed in agriculture.

7 8

A tax structure based on the Soviet model was adopted, the main

feature of which was the turnover tax. The addition of this tax to the wholesale price of a commodity established Its retail price. The turn­

over tax was a powerful fiscal tool for the central planners who, by

manipulating wholesale prices and the turnover tax rate on various goods,

could control enterprise profits and redistribute national income. Turn­

over tax revenues along with profit and depreciation payments from enter­

prises to the government were to be the main sources of Investment funds

which were then allocated according to the planners' priorities.

The collection and processing of plan related information was

intensified. This new information plus the experience generated by the

successful experience of the 1947-1949 Two Year Plan enabled planners

to calculate for each branch input-output ratios, norms for capacity

utilization, labor productivity norms, raw material allocations and out­

put targets. Thus, armed with flexible policy tools such as the turn­

over tax and the basic technical information necessary for directing the

economy, the central planners began more extensive planning of a long

run nature.^

The First Five Year Plan (FYP) was formulated and adopted for

1949-1953 with ambitious goals for the econony. The basic goal was to

develop heavy industry to further Czechoslovakia's position as a sup­

plier of capital goods, especially to other less-developed socialist

economies.** Specifically, compared to 1948, by 1953 industrial output

was to increase by 57 percent with heavy industrial output increasing

66 percent. To provide for this high rate of expansion the output of

basic industrial materials, e.g., coal, iron and steel, was to be in­

creased.^ The plan also anticipated that the level of imports of Western European capital goods would be expanded.** In keeping with the

Soviet development strategy of sacrificing present for future conaump- 7 tion, a large proportion of national income was to be devoted to in­ vestment* Output of producers goods were planned to expand by 70 per­ cent* however, under this version of the First FYP, consumers were to have some concessions; consumer goods output was planned to increase Q by 50 percent.®

These targets remained in effect for only two years because the original version of the First FTP was abandoned in 1950. Several exo­ geneous factors led to the decision to revise the plan, the most impor­ tant of which were the consolidation of Soviet political power in c Eastern Europe and the outbreak of the Korean War. In 1949 the Coun­ cil of Mutual Economic Assistance (CMEA) was formed in Moscow. Through this organization the Soviet Union was able to exert some pressure on the Eastern European members of CMEA to conform rigidly to the Soviet bureaucratic and economic model. For Czechoslovakia, this conformity included; 1. adoption of Soviet accounting and planning procedures;

2, adoption of the Soviet-style ministerial system, under which each enterprise was made responsible to one of twelve ministries; 3. estab­ lishment of the annual plan as the primary planning tool; 4. strict Q centralization of the economy and political structures. After the

Korean War began in 1950, Western nations erected an embargo on trade with all Communist economies. This eliminated the West as a source of the capital goods required for Czechoslovakia's planned Industrial ex­ pansion. The embargo also reinforced the orientation of the Czechos­ lovak econony toward the Soviet block nations with whom the terms of 10 trade vere favorable,^ and made Czechoslovakia a prime supplier of capital goods to CMEA economies.

A revised "First" FYP for 1950-1955 replaced the original FYP in

1950. This revised version called for increased Investment and output from the producer goods sector. Also, higher levels of raw materials, e.g., coal and iron, were to be produced domestically because of insuf­ ficient supplies from other CMEA trading partners. The proportion of national income allocated for investment was raised to over 20 percent in order to provide industry with the necessary resources with which to increase output to a 1953 level 26 percent higher than the original goal. The producer goods industry (i.e., heavy industry) had output targets 35 percent higher for 1953 than the original plan and the con- fl sumer goods industry 13 percent higher. Again, the influence of the

Soviet model, with its stress on heavy Industry was evident. Forty per­ cent of investment was allocated to industry but only eight percent to agriculture.

As the economy developed under the revised plan, the socializa­ tion of various sectors of the economy continued. By 1952 over 96 per­ cent of Industrial, retail, crafts and transport branches were Included in the socialist sector. Only agriculture lagged behind: State farms and cooperative farms controlled 16 and 29 percent of the agricultural 12 land, respectively. Because of "balance of payments" problems be­ tween the industrial urban areas and agricultural rural areas, the cen­ tral planners desired to increase their control over agriculture through collectivization. In addition to controlling farm Incomes planners also desired to channel manpower into Industry and thereby increase the productivity of agricultural labor* However, the pace of successful XI collectivization of agriculture was severely limited by the lack of in­ vestment funds for additional machinery and fertilizers to increase the productivity of collective farm workers.

For the first three years, up to 1953, the revised First FYP goals were met more or less successfully for key economic variables.

Industrial output and national income grew at 15 and 10 percent per year, 13 respectively. In 1953, the electric power branch surpassed its re­ vised output target and the raw materials branches of steel, iron ore and coal surpassed their original output targets also although they did not quite achieve the revised levels. However, of importance to the construction sector, the production of cement did not reach the origin­ ally desired level.1* £ven though some targets were not met, it is worthwhile to note that the Czechoslovak economy did grow significantly throughout this period, in contrast with the experience of Western

Lurope which underwent varying degrees of recession during the same period. The central planners had been successful in insulating the econony from many of the major Western sources of recession by discon­ necting the linkages between consumer demand and production decisions.

However, the achievement of planned targets up to 1953 had definite costs and many of these negative factors eventually led to the

1953-1954 downturn. The goals of the electric power industry had been achieved by overuse of plant and equipment which should have been ren­ ovated. Consequently, the unscheduled downtime of electrical gener­ ating plants Increased due to breakdowns, thereby increasing the inef­ ficiency of other sectors.15 Bottlenecks also developed in the supply 11 of raw materials, especially of coal, even though some raw materials branches were moderately successful in meeting their goals. The plan­ ners had underestimated the raw materials required to meet the desired growth rates of other industries and the investment allocated to the development of raw materials did not yield results quickly enough to supply all demands. By mid-1953 the excess demand for raw materials, especially coal, had risen to a level which required a slackening of the growth of industrial production.^**

One method of reaching planned targets was the use of overly taut plans, that is, setting targets deliberately above capacity.*^ As evidence of this tautness, plans were not fulfilled; e.g., actual na­ tional income and fixed investment were only 94 and 85 percent of their 18 revised plan levels for the period 1951-1953. Moreover, the use of excessively taut plans resulted in excess demand for Inputs and outputs.

In attempting to achieve the planned output levels, labor was employed much more extensively than had been anticipated by the planners. For example in 1953 the planned level of nonagrlcultural employment was

3.88 million persons, but the actual level reached 4.13 million persons.

The high levels of employment were brought about and sustained by ris­ ing wages and increasing participation of women in the labor force

Much of the increase in employment was made possible by the use of re­ serves of labor which were underemployed la the first few years follow­ ing WWII.19 Although planners did not realize it, by 1953 these labor reserves were depleated and further increases in Industrial employment could only come from agricultural labor. From 1949 to 1953, the pro­ portion of agricultural manpower in the total population fell from 29 to 20 percent as labor was directed to Industry.^ With the low planned 13 levels of agricultural investment* and even lower actual additions to 20 the agricultural capital stock* planners could not Increase producti­ vity enough to offset the decline in manpower. Thus* both investment policy and demographic trends exerted downward pressure on agricultural output.

Moreover* two other factors compounded the agricultural problem.

The demographic shift was intensified by peasants who abandoned their land temporarily because of uncertainties about the possible extent of collectivization. This only furthered the decline in agricultural pro­ duction. Also* in the fall of 1932* the harvest was disaaterously low.

Lack of feed grain lead to slaughtering of livestock.^ By early 1933 the decline in agricultural production had resulted in food shortages and the planners were forced to import large quantities of food. Be­ cause Czechoslovakia previously had been almost self-supporting in 22 food* the necessity of food imports had not been foreseen and a bal­ ance of payments crisis resulted. In order to avoid Incurring balance of payments deficits* planners had to pay for grain and meat Imports with funds allocated for the purchase of raw materials. The decrease in raw materials imports added to the bottlenecks of input supplies* further slowing Industrial production. By the end of 1933* the growth rate of national income* indicating the slowdown in all sectors* had

fallen to 8 percent.^

Other factors contributed to the 1933-1934 downturn. The annual plans up to 1933 lacked provisions for effective regulation and enforce­ ment of planners' priorities and intentions. Thus* enterprises were

able to circumvent the linkages and objectives specified by the plan. 14

Ironically, large quantities of both intermediate and final goods pro­ duced by the centrally-planned system were allocated by the black market.

This problem, like the other causes of the 1953-1954 downturn discussed up to this point, introduced restrictions primarily on the supply of in­ puts or outputs. Changes in demand, specifically export demand, for

Czechoslovak goods also adversely affected the economy. In 1953, due to a decrease in international tensions and the political uncertainties surrounding the struggle for power after Stalin's death, the Soviet

Union embarked on a "New Course" in economic policy. This policy called for Increased priority to be given to raising consumption levels and a correspondingly slower pace of growth in heavy Industry. Because of this change in emphasis with regard to investment priorities, CMEA de­ mand for Czechoslovak capital goods declined. The deterioration of this export market lead to balance of pay&ents pressures which also necessi­ tated a decrease in raw materials imports. However, the slowing of

Soviet industrialization did have beneficial effect of slowing the re- 23 quired pace of domestic Industrialization.

In summary, up to 1953 Czechoslovakia was able to achieve rapid development and to meet the output targets established by the central planners, however, the growth strategy emphasizing heavy industry created imbalances which ultimately offset the gains and caused a down­

turn in economic growth. This growth strategy was termed by Czechoslo­ vak economists a strategy of "unbalanced growth" which meantt

"First ... a lack of correspondence between the output of basic materials and the needs of the industrial superstruc— tive, which resulted in inefficient use of capacity and waste. Second, the consumer, though sharing for a time in the fruits of industrial growth and the initial recovery 15

of agricultural production, was ... suffering a reduction In his standard of living, which threatened to become cum­ ulative unless an effort were made to restore agriculture

As a result, the revised "First" FYP was scrapped in 1953 and

several remedial measures were adopted by the planners. For the next four

and one-half years, the economy was to be guided by a series of annual

plans. The Second FYP, discussed below, was not adopted until late 195S

even though officially its duration began in 1956. The Czechoslovak plan­ ners, drawing on recent Soviet experience, improved their control over

enterprises and also increased the role of the annual plan in centrally

directing the economy* To this end, the plan became more complex includ­

ing output targets, allowable input (e.g., electricity) levels, capacity

utilization levels, wages, prices, profits, revenues and expenditures.

Annual plans attained the highest disaggregation and complexity during

the 1954-1958 period, often specifing details for Individual enter- 25 prises.

To redress the effects of unbalanced growth, the 1954 plan^**

called for slower growth of heavy industry. Capital and labor in agri­

culture were to be emphasized to Increase the supply of agricultural

output by 12 percent. Sixty percent of the total planned increase in 22 the labor force was to be assigned to agriculture. As incentives to

agricultural workers, both the availability of manufactured goods in

rural areas was to Increase and farmers* money Income was planned to in-

2 7 crease by 18 percent. The main priority in agriculture was to be

fodder crops, an essential input in the production of livestock and re­

lated products (meat, milk, butter). However, the output levels were

realistically targeted below the original First FYP and were assigned 16 on regionally to compensate for differences in fertility. Increased re- 22 liance on food imports was to be financed by capital goods exports to a wider clientele, including underdeveloped nations outside the CMEA block.

The planners also took two complementary steps, a price reform and a monetary reform, to ameliorate monetary pressures on the econooy.

As pointed out above, shortages of both agricultural and manufactured consumer goods were caused by the investment priority assigned to heavy

industry. These shortages, coupled with rising wages, lead to a high degree of repressed inflation. In addition to pressure from the increased

liquidity of consumers, producers experienced a large Increase in liquid­

ity. The State Bank had expanded credit far too rapidly, granting credit to enterprises almost automatically.^ In spite of tightened credit con­

trols by the Bank in late 1952, enterprises were able to increase their

inventories through 1953, Indicating credit was still too easy to obtain.**®

In keeping with the spirit of the "Dew Course,'* the Czechoslovak planners decided to deal with this excess liquidity and repressed infla­

tion by abolishing rationing and by simultaneously reforming both con­

sumer goods prices and the currency. A single price system was estab*^

llshed for all goods. To balance consumer demand in the absence of ra­

tioning, prices of those goods previously rationed were to be increased

and prices of those not rationed were reduced to 20 percent of their

former level. Similarly, money wages in general were reduced to 20 per­

cent of their former level. Some low income groups were granted rela­

tive wage increases which only partially offset their losses from the

rise in rationed-goods prices. In order to eliminate the excess 17 liquidity of consumers and producers and to adjust the currency to be commensurate with the nev prices and wages the following currency con­ version was undertaken on June 1, 1953.

"From an internal point of view, there were two basic conver­ sion ratest 5 old crowns for one new crown, and 50 old crowns for one new crown. The favored rate applied to (1) current accounts of enterprises; (2) the first 5,000 crowns of individual savings deposits! (3) an amount equal to one month's payroll in the case of private enterprises; (4) the first 5,000 crowns of the "indivisible funds" of Types 111 and IT agricultural cooperatives; and (5) the first 300 crowns of currency of Individuals holding ration cards. The 50:1 rate applied to all other holdings of currency by indi­ viduals and enterprises. Savings deposits and the deposits of agricultural cooperatives were treated on a sliding scale, depending upon their sice. Various annulments of debt and readjustment of Insurance policies took place simulta­ neously. . ."30

While a step in the right direction, these measures did not im­ mediately restore the balance to the economy. The performance of the economy in 1954 was mixed at best. The growth rate of national income

fell to 4 percent per y e a r . ^ Although the 1953 fall harvest was good,

increasing the fodder supply, Imports of food were irregular, leading to irregular retail supplies, especially of meat. Quelng replaced

rationing when demand was not satisfied at the new prices. Compounding

the food situation, the grain harvest of 1954 was worse than that of

1953. However, overall consumers fared better in 1954 because more manufactured goods were available. For example, the volume of retail

trade was 28 percent higher in mid-1954 than mid-1953.^ Consumer li­

quidity continued to expand in the form of rising wages at an undesir­

able rate, i.e., above the plan, primarily because managers overspent wage funds. By July, 1954, the overage was estimated to be more than 33 1.1 billion lCSa., some 10 percent of the planned annual wage bill. 18 During 1954, the supply of raw materials continued to be a bottleneck* The winter of 1953—1954 was unusually severe and some power 32 cuts were necessary. However, by the end of 1954, electrical pro­ duction had grown by 10 percent over 1953 and coal output by 6 1/2 per­ cent. The output of crude steel declined by 2 percent; pig iron pro­ duction remained constant, and cement output grew by 10 percent over

1953.^ The annual plan for 1955 called for continuation of the trends established in the 1954 plan, i.e., emphasis on increased supplies of raw materials and concessions to consumers. Gross output of producer 35 goods was planned to grow at the same rate as consumer goods, 9 percent.

The effects of the more balanced approach to growth became evi­ dent by 1955 as indicated by the 11 percent growth rate of gross indus­ trial output, up from 4 percent in 1954. Generally, the economy as a whole performed better as the energy bottleneck gradually was broken and the supplies of raw materials increased. Electrical output grew by

10 percent again in 1955 and coal production by 9 percent. Outputs of crude steel, pig iron and cement increased at annual rates of 4 1/2, 34 7 and 13 percent, respectively. Another major reason for the success of the plan was the large jump, 8 percent, in the productivity of labor.

The coal supply was the remaining constraint on production; use of lower grades of coal was expanded in the generation of electricity and 36 in other Industries.

Agriculture fared well in 1955 with a good harvest resulting 37 from better weather and a larger supply of fertiliser. This enabled personal consumption to rise without additional pressure on the bal­ ance of payments. The output of grain rose from 5.0 million tons in 19

1953, Che last good harvest, to 6.3 million tons.^® The potato crop, important for fodder, was lower than 1954 due to a shortage of farm 39 labor and destruction by Insects. Numbers of livestock remained es­ sentially constant as planned, and excess demand for meat at the retail

3 0 level continued. The supply of durables also did not meet the demand; but in the market for some nondurables, notably textile goods, buyers* markets appeared. As consumers began to reject lower quality Items, stocks accumulated and prices had to be lowered on these goods In order 38 to clear the market.

The success of the 1955 plan and the resumption of the industri­ alization drive throughout the CMEA led the central planners to adopt an ambitious plan for 1956, the main feature of which was the increased share of national income to be devoted to investment. Some of the an­ nual growth rate targets established were as follows: national Income,

8 percent; gross industrial output, 9 percent; gross agricultural out­ put, 9 percent. Funds allocated for total investment were to Increase by 20 percent; investment in electrical production was to grow by 13 percent, in agriculture by 30 percent and in heavy industry by 34 per­ cent , The planners* primary priority was to widen the raw materials base, and as can be seen from the above targets, capital goods branches were emphasized accordingly. Increases in agricultural production were 40 to come primarily from higher yields per hectare.

The performance of the economy was mixed in 1956 with industry meeting its planned goals but agriculture falling well below planned levels. Planned growth was achieved for consumer goods and surpassed for producers goods. Coal production, while exceeding the planned 20 output growth, was not sufficient to prevent underutilization of capacity.

Actual total investment growth, 12 percent, was far below the planned 21 percent. Part of this shortfall was attributed to the construction branch! there was a 10 percent decline from 1955 in the construction of housing instead of the planned 12 percent' increase. Agricultural output suffered because of adverse weather and the low level of mechanization.^

Although Czechoslovakia was the only economy of Eastern Europe to sur­ pass the 1955 level of grain harvested, the small increase was over­ shadowed by actual decreases in other crops. Thus, the actual level of agricultural output grew by only 3 percent, much less than the planned

9 percent. Large imports of grain were still required. Meat and animal products increased but with the shortage of fodder, some of the increase was due to extra slaughtering. Generally, the bad harvest and poor in­ vestment performance of 1956 reduced the possibility for expanding con— i o Burners' living standards in 1957. The annual plan for 1957 reflected the mediocre advances of the econouy in 1956 with markedly lower growth targets compared with 1956.^ Also influencing the planners* decision to lower targets was a shift in emphasis to long run plans, discussed below.

In this climate of uncertain economic performance the central planners began preliminary discussions and studies of the planning sys­ tem. These analyses eventually resulted in the economic reforms of

1958 and in the Second FYP adopted in that year covering 1956-1960.

During 1956, tentative planned goals were set for key variables-agri- 44 cultural targets for 1960 were established as early as 1955 --to be scrutinized, revised and synchronized with other GMEA economies* long 21 term plans. Thus the period 1956-1957 was a transition period with much self-examination by the Czechoslovak central planners.

The proclivity for highly centralized decision making by plan­ ners had had several detrimental effects on the economy. Because the central planners were not (and could not be) intimately familiar with the technicalities and technology of each major enterprise or groups of enterprises» they miscalculated important magnitudes used in allocating resources and funds* These errors* involving under- or over-estimates* included discrepancies in capital output ratios; the investment required in raw materials to achieve output levels required by heavy industry; the reserves of underemployed capital stock; the material balances re­ quired to achieve planned investment. Another problem was that highly centralized investment decisions had left individual enterprises with no control over investment. Small enterprise-level projects* e.g.* for maintenance or modernization* had been ignored in favor of grandiose projects with long gestation periods. This tendency toward large in­ vestment projects was reinforced by artificially low wholesale prices for investment materials and consequently too many projects of the wrong size or duration were undertaken* Furthermore* lack of control over investment by enterprises diminished incentives to be efficient* in­ creasing waste and underutilization of capacities.^ Thus* the central planners concluded that overly-centralized planning was a major factor in the failure of some previous plans.

This conclusion was reached in other CMEA economies as well* especially in the Soviet Union* the originator of the Stalinist-type of central planning. Once the Soviet centrel planners began to decentralize 22 agriculture early in 1955 and to allow enterprise directors greater autonomy, e.g., to participate in investment plana,47 tacit approval was granted to the other CMEA economies to begin formulating their own reforms. The basic attitude toward centralisation was relaxed:

•'macroeconomic decisions (that is, those concerning the major over-all dimensions and the targets of the economy) remained firmly— indeed more firmly then ever before— the prerogative of the central authorities, but decisions on the mode of their execution were becoming Increasingly the responsibility of those in direct charge of the pro­ ducing units. **^8

This attitude evolved through 1958 with extensive discussions of 49 proposed reforms of the planning system. Also, a process of tatoa- nement among the planners, the Party and enterprise managers led to a final version of the five year plan. In 1958 with the enactment into law of the Second FYP for 1956— 1960, the first comprehensive reform of 51 the economic organisation was introduced. The two basic purposes of the reform were to simplify and decentralise the economic organisation.

To simplify the structure for planning and administration, the Czech­ oslovak central planners followed the Soviet example. The central plan­ ners retained control of overall planning but transferred executive tasks to ministries and councils at the national and regional levels.

The staffs of the ministerial bureaucracy were reduced. Finally, as a complementary reform to the decentralization measures discussed below,

52 detailed annual plans were discontinued. Simplified long range five 53 year plans were to become the primary planning tool with targets specified only for critical branches; the Second FYP was to be indica- 54 tlve but not specific for many sectors. 25

In decentralizing the economy, greater autonomy was granted to local governmental bodies and enterprises. For example, the Slovak.

National Council was allowed to control economic plans and budgets with* 52 in limits specified by central planners. Enterprises were allowed increased flexibility with respect to input allocations and output plans.

Only those raw materials in short supply were allocated centrally. Only the production of goods crucial to the national economy was planned centrally; other goods could be traded at the discretion of individual enterprises.55 Further, enterprises were to prepare their own technical, industrial and financial plans within general guidelines set by central 52 planners. Thus, the control of short run production decisions was de­ centralized.

The planners also decentralised Investment decisions. In 1958,

60 percent of all Industrial investment was to be financed by local authorities and enterprises from Internal funds at their disposal.

Again, enterprise control of investment was subject to limits estab­ lished centrally. The basic criterion for undertaking investment was to be enterprise profit, the difference between revenue from sales of products and all costs including charges for capital. Also profit was to replace gross output as the success indicator for enterprises. Con­ siderable discretion was allowed the firm in use of funds whose purpose previously had been rigidly defined. Revenues could be transferred more easily from one fund to another. Fart of profits were to be used as enterprises saw fit to supplement wages or to expand capacity or

Inventories. Increased independence over working capital was Intended to encourage maintenance and modernization projects. * 24

However, two oversights by planners lead to unintended results.

First, reminiscent of the overabundant credit prior to the 1953 monetary reform, the planners did not sufficiently restrain the level of credit granted to firms by the State Bank, Second, the planners made major miscalculations, primarily of the level of investment that would be fi- e j nanced by firms.

"Since profits and their growth were the primary souce of discretionary funds, the firms attempted to generate a high rate of profit growth by Investing in new capacity in lieu of maintaining or replacing old equipment."5 '

Given increased Interchangeability of various enterprise funds, managers redirected as much money and credit as possible toward the expansion of capacity. Maintenance and depreciation funds, funds Obtained by de­ creasing inventories and by selling unnecessary machinery and excess funds from previous years were directed into expansion of plant and equipment. Unprofitable firms which were not able to generate finds in­ ternally for capacity investment used their credit line with the State

Bank to borrow money for such expansion.

As a result of the 1958 reform, a quantum jus? in the rate of growth of fixed (i.e., of the capacity expansion type) investment was evident to the planners by early 1959. At that time they revised the estimate of the actual growth rate of gross fixed investment for 1958 58 upward from 5 to 9 percent. Moreover, as a result of meeting the planned goal of 9 percent for 1958, rather than underfulfilling it, the

Investment plan established for 1959 was considerably more anfcltlous than had been anticipated earlier.

*'The most striking common feature of the plan ... is the substantial increase in rate of fixed capital formation... 15

Intended in 1959, in marked contrast with the policies of the recent past ... [with these past policies] the distri— bution of resources was everywhere modified ... at the cost of reductions in the rates of growth of fixed in­ vestment ...

... [for] Czechoslovakia the rate of Increase of fixed investment planned for 1959 [131.was] considerably higher than the average contemplated under the new long­ term plans [91]."59

However, even with the upward adjustment to aceoimt for enterprise be­ havior, the actual fixed investment growth rate for 1959 overfulfilled the plan by some 6 percent.In 1960 the annual plan for investment growth of 10.8 percent was again exceeded by the actual rate of 12*6 percent.^ In response to the overfulfillment of the plan, the invest­ ment goals of the Third FYP <1961-1965) were revised upward from 55 to 62 60 percent increase over the 1956-1960 plan period.

Unfortunately, the central planners could not control or coordi­ nate the higher levels of investment. This lack of direction from both planners and misleading performance Indicators resulted in Inefficient projects, many of which would never be completed. Moreover, the higher levels of investment led to structural imbalances similar to those which arose in 1953. Problems with the supply system developed as shortages 63 appeared and were aggrevated by the uncoordinated investment. For ex­ ample, the capacity of automobile plants was increased, but that of tire plants was not.^ Also, early in 1959 production of basic materi­ als began to stagnate, especially the production of coal, iron and 64 steel, creating conditions of excess. In response to requests by enterprises for guaranteed supplies of inputs, the central planners be- 63 gan to recentralize economic decisionmaking in I960.9 However, the damage to the economy and the disproportions gener­ ated were not immediately rectified because the level of Investment was not lowered sufficiently. In 1961 investment grew by 7 percent over

I960. It was not until 1962 that the planners' strategy of lowering

Investment to concentrate on completion of key projects became effective in 1962 total Investment declined by 5 percent from 1961.^ With the establishment of the State Commission for Investment in early 1963, the recentralization of Investment was completed. The tight central control over the allocation of Investment finds was clearly evident in the 12 percent decline in actual total Investment in 1963.^

The wild gyrations of the investment growth rate— from +13 per­ cent in 1959 to -12 percent in 1963-^rere symtomatic of the unsettled economic conditions in the early 1960*s. From the impact of the ill- conceived decentralisation and a series of exogeneous problems the econ­ omy slipped into a severe and protracted recession which lasted from

1961 to 1965.*** The growth rate of national income fell from 6 percent in 1960 to 7 percent in 1961, to 1 percent in 1962 and finally bottomed out in 1963 when the level of national Income actually declined by 4 percent. The upswing began slowly in 1964 with national income in- 69 creasing by 1 percent and by 3 percent in 1965. The agricultural sector was responsible for most of the slowdown in growth of national income. Output of important crops generally declined from year to year between 1960 to 1 9 6 4 . Any increases between 1960 and 1961 were at best marginal and the shortfalls of 1962 were disasterous. Basically, the declines can only be attributed to bad weather.^ As in the early 1950's, the agricultural shortages forced the central planners to increase food imports at the expense of balance of payments deficits. However, external events and changes In the struc­ ture of Czechoslovak foreign trade compounded the planners* dilemma.

Two major suppliers of grain and other foodstuffs were China and the

Soviet Union. However, during the period under discussion, the flow of

Chinese exports to Czechoslovakia was severely restricted by disloca­ tions in the Chinese economy caused by the "Great Leap Forward"^^ and in 1964 the poor Soviet grain harvest failed to yield any appreciable exportable surplus. Thus, the Czechoslovaks were forced to import most of their grain from Canada and the United States.

In contrast to the advantageous position that Czechoslovakia had enjoyed in the early 1950's, during the early 1960's the planners were faced with a sellers' market for goods they needed to Import and a buyers* market for Czechoslovak exports. In order to pay for the agricultural imports, the planners attempted to Increase exports, primarily of machin­ ery. However, other socialist nations had reached a state of develop­ ment at which they, too, began to export capital goods and the Czech­ oslovaks had to contend with greater international competition. More­ over, the central planners were not able to expand the production of capital goods to desired levels because of supply limitations on raw materials. Larger quantities of machinery required increases in, e.g., coal and iron ore inputs, both of which were traditional supply bottle- 72 73 necks. On the domestic front, the severe winters of 1962/1963 and

1963/1964 depleted coal reserves thereby resulting in extensive under­ utilization of capacity. Internationally, other socialist nations had discovered that they could sell their raw materials to Western European nations on more advantageous terms than to Czechoslovakia. 72

The planners' responses to the balance of payments problem c a m mostly at the expense of consumers. First, between 1960 and 1965, when 74 domestic consumption and Industrial output was decreasing, planners increased the exports of consumer goods from 11 percent to 20 percent of 72 all exports, imports of foodstuffs were held to the lowest level pos­ sible. While food imports Increased by 14 percent In 1963 over 1962, they were cut by 10 percent in 1965.^ Finally, the share of trade with 72 Western Europe was expanded.

The recession also had serious effects on the long run plan and the entire planning superstructure. The Second FYP was completed as scheduled in 1960. The Introduction of the Third F Y P ^ (1961-1965) co­ incided with the downturn of the economy. As the stagnation of produc­ tion, investment and consumption Increased, the impossibility of achiev­ ing the plan became evident. The viability of extensive development, i.e., by increasing the quantities of inputs, was nearly exhausted. The goals of the Third FYP had stressed large gains in productivity, but enterprises simply did not have the technical capability to achieve these gains.Thus in late 1962, the Third FYP was abandoned.

The year 1963, the worst of the recession, was Intended to be a period devoted to reorganizing and replanning investment and output.

"The major alms of the Intended reorganization were to over­ come the inadequacies of supplies from the basic fuel, power and row materials branches; to reduce Industrial costs by concentrating and specializing production in the processing branches; to adjust the pattern of output to the patterns of domestic and export demand while reorienting foreign trade 29

also towards the more profitable lines of specialization; to solve the problems created by the freezing of re- sources in slow-maturing investment and unsaleable stocks."78

The gradual slowdown of the Czechoslovak economy capped by the severity of the recession, forced the political leaders to permit funda­ mental re-thinking of the entire economic system. The special urgency required by the mature industrial structure led to the adoption of the

Hew Economic Model (NEM) and the abandonment of the Soviet central plan­ ning model in 1967. The essence of the NEM was to be market socialism.

Briefly, the chronology of events leading to the comprehensive inception of the reforms in 1967 was as follows. In addition to scrap­ ping the Third FTP in December 1962, the Twelfth Congress of the Com- v 80 munist Party appointed Professor Ota Sik to head a group of economists 81 to investigate the possibilities for reform. The initial proposal for the NEM was completed in January 1964 and the groundwork for the imple­ mentation completed later that year. Early in 1965, the NEM was pre­ sented to the Central Committee and approved. Much of the opposition to the reforms encountered by Sik throughout the reform period came from entrenched bureaucrats in the central planning agencies. They realized that adoption of the NEM would curtail or eliminate their spheres of influence by replacing central directives with market mechanisms. Thus, many bureaucrats tried with varying degrees of success to stall or even 82 sabotage the implementation of specific reforms.

The remainder of 1965, corresponding to the last year of the recession, was spent in processing the legal and organizational measures required for transition to the NEM. Also in 1965 and continuing into 30

19 be, the central authorities conducted a series of experiments in vhich selected enterprises were allowed to operate under the NLH without man­ datory plans and with income sharing by workers. This was done to gain ill some insight of the impact that the NEM would liave. ^ Also, in order to make the organizational reforms of the NEM consistent with market mech­ anisms, all wholesale prices were recalculated in an attempt to include meaningfully and consistently the cost of capital.^ On January 1, 1967, tne NEM was enacted in its entirety; the revised wholesale prices were adopted along with a new, uniform tax structure and investment and price- setting decisions were decentralized.*^

V There were three broad economic reforms embodied in Sik's pro­ posal for the NEM which were intended to transform the centrally di­ rected economy to one directed by the market in an orderly fashion and to begin repairing the damage done to the economy by central planning.

First, fundamental changes were to be made "in the central management apparatus and in the organization of production generally.In order to change the role of planning from directing to indicating, the entire bureaucracy had to be simplified and streamlined. The existing complex ministerial system was to be dismantled and replaced with one indus­ trial ministry and a few general ministries for, e.g., finance, foreign trade. A small central planning commission was to be subordinate to those few ministries. While this particular reform was approved by the government. It was never completed to the extent originally intended.

The introduction of market pressures required not only the elim­ ination of controls from the top of the economic hierarchy but also freeing of the enterprise at the bottom. The reorganized Industrial 31 structure was to Include replacement of mandatory membership in centrally-directed monopolies by competition among enterprises acting O 7 on their own calculations of the best alternative. however, cartels of producing enterprises were to be formed voluntarily* Called "com-

on bines" or "trusts," they were established supposedly to act in the market on behalf of members. Business taxation was to be the primary 89 link planners would have with the management of enterprises. For the purposes of advancing the technological development of the Czechoslovak economy and entering foreign markets cooperation between enterprises and foreign, i.e.. Western, firms was to be encouraged. In order to take fullest advantage of private initiative, service branches were to be established completely as private enterprise. Previously, the self- interest or private initiative inherent In competitive behavior had been present, but illegal, in the centrally planned system. By legal­ izing such behavior, the government budget could benefit from tax rev- 87 enues from the enlarged private sector.

The second major reform "of the function of prices and of for­ eign trade"®^ was required by the first* In order for enterprises to produce according to the economically correct or rational best alter- Q 1 native,7,1, mentioned above, the prices of inputs and outputs had to re­ flect true alternative coats. This required that prices reflect the competitive pressures of supply and demand, i.e., relative scarcities*

Determination of such prices could not be made from above by central planners primarily because planners did not have the information nec­ essary to evaluate the correctness of enterprise cost reports. The existing prices, especially wholesale prices, had been distorted 32 considerably by arbitrary administrative decisions. Thus, initial prices Cor 24,000 groups of goods were to be established by means of y2 computer approximations of the "true" prices.

The restrictions on price fluctuations were to be eased gradually as enterprises gained experience in price-setting decisions. Moreover, with the large amount of repressed inflation existing, it was feared that freeing prices too quickly would result in high levels of open inflation.

The transition period between fixed and free prices was to be several years long. Initially, all goods were to be assigned to one of three groupsi a group with centrally controlled prices, a group with upper and lower bounds ("limit prices") and a group with free prices. Over the transition, free prices were to be introduced in stages, decreasing the first group and enlarging the last two, eventually freeing most prices as the market began to function. Also, because the turnover tax combined with the wholesale price determined the retail price, retail prices were to be gradually freed by freeing wholesale prices and con- 93 solldating the myriad of turnover tax rates to one.

In addition to the reforms in prices and turnover taxes to re­ store market functions, the government was to emphasize the following policies for balanced growth:

"relative reduction of investment in heavy industry; higher interest rates; savings in the bureaucratic apparatus; ty­ ing wage increases to higher productivity; priority to consumer goods production, highly competitive export in­ dustries, services, and housing construction; gradual abolition of state subsidies, especially in the foreign trade sector; anti-monopolistic policies and promotion of competitive pressures, particularly via foreign trade"94

In order to pursue effectively and profitably the policies involving foreign trade, that sector was to be decentralized, allowing producers 33 to choose their best export or Import alternative. This required that the information about world prices be available for enterprise decisions; previously enterprises were supposed to be Isolated from the fluctua­ tions of the world market. Again, however, It was envisioned that the competitive pressures would be imposed gradually on the foreign trade corporations to avoid bankrupting some producers immediately.

The gradual process of creating competitive markets for goods, services, labor and capital was to be guided by a modified form of plan­ ning. The third basic reform in the NEM was the replacement of centrally- directed mandatory plana with indicative plans and guidelines. A Cen­ tral Economic Council was to be established, composed of committees of experts to represent various interest groups. The various committees would formulate alternate economic goals and the technical plan for their achievement. Alternative plans then would be evaluated by Parli­ ament and one selected for enactment into law as the basis for govern­ ment monetary and fiscal policies. However, in contrast with the Soviet model, this plan would not be binding on firms but would be an aid to them in their long run planning decisions. In another departure from

Soviet practice, production investment was to be decentralised and only

Indirectly controlled by credit policy. Investment by the state was primarily intended to influence long run economic development; only in­ vestment in the Infrastructure would be undertaken directly by plan- 96 ners.

The implementation of the NEM was an ambitious attempt to trans­ form a centrally planned system into a market system. Chronologically, most of the provisions of the NEM were short-lived. With the armed 34 intervention by the Soviet Union in August, 1968, progress on the re­ forms became intermittent until mid-1969 when the economy was recentral- ized. A major exception in the general demise of the NEM was the price reform which remained in effect.

In the short period during which the NEM was in effect, the econ­ omy did begin to move in the general direction intended or expected by reformers. National income grew 6.9 percent in 1967 in comparison to

10.2 in 1966. However, the decline had been anticipated as a one-time consequence of the de-emphasis of global production (i.e., total output) as a success indicator* This anticipation was verified by a steady growth of national income, 7 percent, in both 1968 and 1969. Personal income grew at an accelerated rate allowing total consumption growth by

6 percent in 1967 and by 10 percent in 1968. 97 ' Growth in consumption was made possible by enterprises responding to demand pressures with in- 98 99 creased supplies and by higher levels of imports in 1968. However, the Soviet invasion in mid-1968 set off a round of precautionary pur­ chasing and withdrawal of savings by consumers, resulting in excess de- 98 mand in the consumer goods market.

Even before the Invasion other problems and imbalances had arisen with the NEM. One hindrance to effective implementation was a shortage of managers who were both technically qualified to make market-oriented decisions and accustomed to accepting responsibility for those decisions.

Enterprise managers also had to cope with a large amount of obsolete 100 equipment in meeting the demands of the market.

A more serious problem with multiple repercussions were the er­ roneous price calculations underlying the 1967 price reform. Reformed 35

prices were based on neither market-clearing prices nor marginal costs

and thus did not include true scarcity (Cf., footnote 84). The reform­

ers expected wholesale prices to increase by about 30 percent after the

price reform was implemented,^^ However, under the pressure of in­

creasing costs enterprises were able to push prices up to the upper bound

on limit-priced goods and beyond the reformers anticipations on free- 102 priced goods. By late 1969, industrial wholesale prices had risen by 36 percent, 50-54 percent in construction and 20 percent in agricul- 101 ture. Retail prices increased by 10 percent. With higher prices, enterprise profits reached higher levels than anticipated thereby shield- 102 ing firsts from competitive pressure. To compound the problem of ex­ cess profits, the tax structure introduced in 1967 was based on an underestimate of average profit. Thus, much like the situation during

the 1958 reforms, the government failed to maintain effective, uniform*^

controls to reallocate excess profits. In 1966, the high level of after­

tax profits allowed enterprises to finance Internally 57 percent of in­ vestment rather than the 44 percent planned by reformers. Thus, because credit restrictions could not be used effectively to direct investment,

reformers were forced to rely on administrative restrictions to prevent

a dispersion of resources through the initiation of too many new 96 projects.

The main problem faced by the reformers, however, was not with

the NEM, per se, but with its half-hearted Implementation by the ex­

isting bureaucracy. The Intransigence of the central planning estab­

lishment is well documented by Sik, e.g. [116]. The NEM never was genuinely accepted and applied, the original intent having been dil­

uted by compromises. 30

"The old administrative planning methods have continued to be practiced more or less openly. ... The administrative planning system found itself reinforced by the formation of trusts that, in fact, hampered the proper working of the market. All these adverse effects strengthened the inflationary pressures, ... on production costs and prod** uct quality, to say nothing of the illegal deals they provoked.

The root of the disequilibrium continued to be the large number of enterprises that were badly run. ... The fear of unemployment and the rising cost of living prevented the central authorities from coming down squarely on the side of the market.

With the DubSek reform government ousted in April 1969, the new regime headed by Husak began to dismantle the KEM without "any systematic and comprehensive view of the model"^^ to replace it. In June 1969, recentralization began. "Agreements" by VHJ*s (see footnote 88) were centrally Imposed obligating member enterprises to supply their products for export and domestic markets. Moreover, VHJ's were given more con­ trol over members' financial transfers, subsidies, supplementary charges i nfi and Investment decisions. Wages became centrally controlled and implementation of legislation regarding the establishment of workers' councils in firms was haltedThe 1969 Economic Guideline was made mandatory rather than indicative. In December 1969, prices were frozen, effectively cancelling limit and free prices. Annual plans were form­ ally reintroduced in 1970, with a limited number of mandatory targets and profit as the main success indicator for enterprises. Simultane­ ously the tax structure for the entire economy was reformed to Increase the central authorities' control over enterprise funds, primarily with a 65 percent tax on profits.nils reform was not the product of the

Husak regime but had its origin much earlier in 1968 (see footnote 103) * 37

Work was begun on a five year plan for 19 71-1973 for which the main ob­

jective was to be raising the living conditions of the whole population.

Also in 1970, the official implementation of a lav enacted in

October 1966*109 3 federalized Czechoslovakia. The former single national

government was reduced in size; the new federal government retained con­

trol of the important economic functions under three ministries: Foreign

Trade, Finance, Labor and Social Security. Two national republican gov­ ernments, Czech and Slovak, were formed which shared joint responsibility with the federal government for, e.g., planning, prices, currency issue

and some economic policies.The republican governments were also

to be responsible for most of the former industrial ministries and com­ mittees. However, in 1971 certain responsibilities shifted back to the

federal authorities as they re-assumed complete control over planning, economic policy and some industries of national concentration.Sik notes, [119], p. 63, that the reduction in size of the central bureau­

cracy was offset by the increase in the bureaucracies created in the re­

publics. Central bureaucrats were merely redistributed to the republics.

Thus, very little was gained by federalization, except increased complex­

ity.

While the above measures for recentrallzing the economy appear

to have been undertaken in an orderly fashion, there was no single uni­

fied plan for developing the economy. Reminiscent of the years proceed­

ing the 1967 reforms, the period 1969-1972 was distinguished by its

lack of direction because of the stalemate between those planners sup­

porting command planning and those advocating Indirect market methods.*^*

"The predominately empirical and fragmentary character of the measures 38 introduced since 1969,"^^ was reflected in the mediocre performance of the economy throughout this period. From 1970 to 1972, national in­ come grew at a rate less than 6 percent per year, well below the 7 per­ cent growth under the NE M . ^ ^

Because this chapter is to provide the economic background for the Czechoslovak Econometric Model, only events up to the final year of the estimation period have been discussed. The availability of data, discussed in the next chapter, limits this economic history to 1972. NOT MS TO CHAFFS I

1 Czechoslovakia was established as a sovereign nation in 1918 a-t

the conclusion of W I, For an account of the Czechoslovak

economy between World V/ars see Pryor {.113] and j_114], o r Brada

|_2l], pp. 4-8. For the reconstruction period from the end of

WV/II to 1948, see Brada [2l| , pp. 8-10, BemaSek |_16] , th e

Economic Survey fo r Europe (ESE) 1952 [l35]» PP- 21-26, and

Busek and Spulber L26].

2 Brada [.21] pp. 9—10*

3 The publishing industry was entirely nationalized in 1949*

4 Busek and Spulber i_26] , p. 221.

5 5S5. 1952 [135], P* 27.

6 Brada |_2l] * P* 1°*

7 This was e x p lic itly acknowledged by the Czechoslovak government.

See fo o tn o te 1 in SSE. 1952 [.1 3 5 ], p . 31*

8 E3E, 1952 L135], P* 29*

9 Brada t_2l] * p. H .

10 Specifically, Brada L2ll, p. 14* states that in 1948 60 percent

of a ll Czechoslovak trade was with capitalist nations and 40

percent with communist nations. By 1953 these proportions had

chan^red to 15 percent of trade with capitalist economies and

79 percent w ith communist economies.

11 See ESS. 1952 [ 135]» Table 13, p . 37.

12 Ibid., p. 36. 39 40 13 Brada , 21 j, p . 13-

14 313, 1954 1135", Table 27, p. 45.

15 Ibid., p. 42.

16 Brada L2l], pp. 14-15*

17 The use of overly taut plans was common throughout the Soviet

block, and particularly in Czechoslovakia. See Brada L2lj],

p . 15, and \22\.

18 BSE. 1955 L l5 5 l* P» 225; PP. 221-235 contain a detailed discus­

sion of the fulfillm ent of investment plans in Eastern Europe

for 1949~1955* See Tables 105 and 106.

19 Ibid., p. 231.

20 BSE. 1954 Ll553, P* 42: The 1955 stock of tractors was two-

thirds the originally planned level.

21 I b i d . , p . 49.

22 Ibid., p. 44.

23 Brada i_2l], pp. 14-16*

24 ESS, 1954 [135]. P. 59.

25 Brada P- 17*

26 See ESE, 1954 , Table 27, p. 45, fo r 1954 and 1955 targets

planned for specific industries.

27 Ibid., p. 59*

28 Ibid., p. 63*

29 See Pesek Ll°sJ » PP* 579-581, for a detailed discussion of the

monetary and credit situation in Czechoslovakia during 1952-

1955.

30 Busek and S p u lb e r [_26j, pp. 387-589. 41 51 According to Ames in Busek and Spulbcr { 26>} , n . 389, th e c u r­

rency conversion rate required for the reduction of liq u id ity

was 10:1 and for adjustment to the new price level was 5*1 r e ­

sulting in an overall rate of 50*1»

52 EbE. 1954 L1??]* P* 51; footnote 5 on this page gives two ex­

amples of shortfalls in planned consumer goods, woolen and

cotton clothing.

55 Ibid., p. 52-

54 SSE. 1955 Ll?5j, P- 175, Table 61.

55 I b i d . , p . 171, T a b le 8 0 . See a ls o fo o tn o te 26*

56 Ibid., p. 172.

37 The pace of collectivization in agriculture continued to be

slow, the planners preferring higher output to more collectives.

Planners attempted "to prevent the decay of existing coopera­

tive farms, while simultaneously the development of private

farming . . . was controlled" (ESE. 1955 Ll35j > P* 1 9 5 )*

The long run goal was to make collective farming predominant

b y I 960.

38 Ibid., pp. 174-178.

39 F°r a discussion of the general problem of the labor shortage

in Czechoslovakia in this period, see ESS. 1957 L1351, PP- 49-

51-

40 E3E, 1955 [_135”i, PP- 171, 183-186, especially Tables 80 and 89.

41 Central planners attempted to develop agriculture with large

increases in manpower rather than capital equipment, e.g.,

tractors. Even with a moderately successful effort to attract 42

labor to agriculture, there was s till a labor shortage which

resulted in 5 percent of the agricultural land laying 1 id le in

1956 (SOS, 1956 i_135n * P- 1 n )*

42 Ibid., pp. I 10-17, including Tables 11-17. Other notable

events in 1956 included negotiations to allow Bulgarian labor­

ers to move into Czechoslovak industry to help ease the labor

shortage. Also, Czechoslovak managers again overspent th e ir

planned wage funds by 2-^ percent in the attempt to coax more

labor services from a tight labor supply. To some extent, this

additional income was spent quickly by consumers in a precau­

tionary response to the unsettled conditions in Hungary and

Egypt. A collectivization drive in agriculture begun in 1955

continued through 1956. The results by the end of 1956 were

th a t 30 percent of a ll agricultural land was farmed by cooper­

atives (pp. I 24-25).

43 Targets for output, investment, etc., planned for 1957 are

listed in ESS, 1956 [1 3 5 ], PP. 1 0 -1 7 , Tables 1 1 -1 9 .

44 ESS. 1955 [ 135], p. 186, Tables 89.

45 For further elaboration, see ESE. 1955 L135], Chapters 7 and 8 ,

and ESS. 1956 L135!l Chapter I , Section 7*

46 ESE, 1955 Ll35], PP. 250-233.

47 Ibid., p?. 193-194, 214-217.

46 Ibid., p. 217.

49 Summaries of the major results of these discussions are con­

tained in: ESE. 1955 Ll35] , PP. 234-235i E3S, 1956 [_135], PP-

I 39-41, II 22-23; ESS, 1957 L.135], PP. I 29-30, 37-39- 43

50 The original tar vts introduced in early l*)y6 are listed in 53E,

1956 [1 5 5 ] t PP* 2-21, ,and. are corn-.red either with the pre­

vious actual performance for 1950-1955 or with the 1949-1953

revised First FYP. B riefly, these targets reflected the 1955

successes in achieving the plan and emphasized the planners*

preferences fo r investment and heavy industry. The targets

were more re a listic, i.e ., lower, than those in the First FYP.

However, the poor performance of the economy in 1956 led to the

revisions of 19571 the long run targets were scaled down; rais­

ing the standard of living was given higher p rio rity; higher em­

phasis was placed on increasing the regularity of the flow of

raw materials. Revised targets are listed in ESE, 1957 Ll35],

p p . I 29-30, and in ESE. 1958 Ll35j , C hapter I .

51 While many of the Bpecific changes were introduced gradually in

piecemeal fashion throughout 1956- 1957, they can he considered

as becoming fu lly effective only in combination with the estab­

lishment of the Second FYP,

52 ESE, 1956 U 5 5 ] , PP* I 39-41*

53 Therefore, from this point the annual plan targets w ill not be

discussed unless there is need for a specific target. Values

for annual plans are available in various issues of ESE.

54 See ?.lso Brada l_2l3* p. 18.

55 ESE, 1957 L135] , P* I 38.

56 Ibid., p. I 39.

57 Brada L^ol , PP* 402-403* 44

56 Economic B u lle t in f o r E urope. 1959 1.134,1* p. 2, Table 1, Cf. ,

E33, 1958 |_135; , p. I 9, Table 4.

59 I b i d . , p p . 1 -3 .

60 ESS. 1959 L.135j f P* II 20; the 1959 actual growth rate was 18.5

p e rc e n t.

61 S3E. i 960 L l5 5 l » P* II 8; note that this is "investment" (per­

haps akumrulace) whereas the previous figures have been for

fixed investment (a component of akumulace; see Chapter II on

the national accounts which includes a discussion of this term).

For comparison, the actual growth rates of investment for 1958

and 1959 were 13.7 and 19.6 percent, respectively.

62 Ibid., p. II 31.

63 Brada L21 ] » P* 19.

64 Economic Bulletin for Europe. 1959 l_134l» P* 14*

65 ESS, 1963 U35] , P. I 31-

66 ESE. 1962 P a rt 2 |135]» p . V I 15.

67 According to Sik in LH91, this interpretation by thisauthor

and Brada L2Q] of the reasons of the recession is similar to

the official rationale for the recentralization in 1962. §ik's

alternate view (e.g., see Lll9l» PP* 61-63) places the blame

for the recession on the inability of the Soviet central plan­

ning model to handle large numbers of complex economic inter­

relationships and mismanagement of the economy by the Czecho­

slovak central authorities. Bernasek [l^J is also a proponent

of this view. More important than the causes of the recession,

however, v/ero its conseauences* As Sik notes, the extremely 45

poor performance of the economy forced the central planners to

re-evaluate the entire organizction of the economic structure.

The climate of self-examination brought about by the recession

allowed those economists with liberal ideas to nneak more

openly. Ultimately, many of these ideas were included in the

reforms officially introduced in 1965-1967.

68 ESE, 1?65, [135], P* I 2, Table 1.

69 E3E, 1968, [135], P. 88, Table 1.

70 For example, see ESE, 1964 l_135j» P« 1 23» Table 11, for crop

production data.

71 For example, Brada [2lj , p. 20, states that Chinese inporta

fell from 787 million K5s. to 67 million Kds. between i960 and

1963* 72 Ibid., pp. 21-22.

73 ESE,1963 [135], p. I 1.

74 For example see ESS. 1964 [135], P* 1 2, Table 1, p. I 8, Table

3, pp. I 35-37.

75 Brada [20], p. 40 4 .

76 The goals of the Third FYP were developed in tandem with the

development and execution of the Second FYP. Specific targets

are listed in the Economic Bulletin for Europe. 1959 [134] »

pp. 2-6, Tables 1-3.

77 Sik Ul9], P. 61.

78 ESE, 1963 I.I35]!, P- I 4.

79 These views are expressed by Sik [119 ] , Kosta L84j and BemaSek

1 17] . This was not Czechoslovakia's first experience with market socialism. For a discussion of the first successful ex­ periment in democratic market socialism in Czechoslovakia, the period between WWII and the 1943 coup, see Bemasek |_l63 •

For this reason, the summary* below, of the major economic features of the NEK follows that provided by 5ik Lll9l- In the growing literature on the 1967 reform other important ac­ counts and analyses of the reforms include those by Holesovsky

L69 ] and Pesek [110] made in 1967-1968 as the reforms were a- dopted; those by Kosta |_84]» Bemasek j_17] * Holesovsky [76] and HoleSovsky, et» al» |_7lJ were written later, after the

Soviet invasion and the re-imposition of Soviet—style planning; summaries of the reforms were made by Marczewski \_S6~] f pp.

99-96, Kocanda [83]* pp. 9-15* and in various issues of ESS

L155^1 • ©*£•» 1962 (Part 2, issued in 1965* Chapter V), 1965

(Part 1, Chapter I, Section 7)» 1966 (Chapter II, Section 7)#

1967 (Chapter II, Section 6), 1968 (Chapter II, Section 2).

The political aspects of the discussions leading to the reform and the reform itself are not considered in this eco­ nomic chronology. This is not to imply that these aspects were unimportant; in fact the economic reforms required substantial political changes, both domestically and internationally. An­ alysis and details of the reform from the political viewpoint are presented by, among others, Golan L55] and various authors in Kusin L87l* A somewhat one-sided view is presented by Sik in the Introduction to |_118j. 47

81 Many of the ar.-umonts in favor of reform were based on the rec­

ognition that possibilities for extensive development of the e-

conomy (i.e., by increasing the quantities of inputs) had been

exhausted. The economy had to be reformed so as to develop by

intensive methods (i.e., by increasing the quality of inputs—

e./'. , their productivity or technology). See BemaSek Ll7] »

pp. 221-213.

82 See Sik [118], pp. 12-16. It is clear from Sik's discussion

that not all of the central authorities believed extensive re­

form to be the solution to Czechoslovakia*s economic difficul­

ties.

83 Kosta [84 ] , p. 180.

84 Holesovsky [_ 69 ] * pp. 88-91* described in detail the specific

methods used to revise wholesale prices. Calculations were

based on factor costs plus an arbitary markup of 6 percent on

the capital stock and 22 percent on the wage bill. He con­

cluded that the attempt to reform prices was the most sensible

and crucial aspect of the N3M. However, in a later extensive

critique [_ 70J , pp. 11-1 7 , he characterized the result as simply

exchanging old disorder for new. The problems with the price

reform are discussed below.

83 HoleSovsky [69 ] , p. 82, lists the more well-documented problems

generated by the central planning system.

86 Sik L1 1 9 j , p. 6 4 *

87 Ibid., pp. 65-6 6 . The number of ministries was eventually re­

duced, largely after the 1968 Soviet intervention when the federal sy3tem was adopted. This will be discussed below* d.jf, 196? l 155■ » P* VI 15» according to which these groups of enterprises were larger than the earlier "economic production units". Somewhat confusingly, Marcsewski [_$6\ , p. 91 » described these new trusts as "production-economic units" or with the

Czech acronym VKJ. This centralization or cartelization from below is discussed and evaluated by HoleSovsky [69 ]■ pp. 95-97,

L70] , pp. 50-35. Pesek L U O ] , pp. 114-H5* concludes about the potential for monopolistic tendencies of these trusts*

"Givena choice, surely both the consumers and producers would prefer to face a profit-maximising monopolist rather than the unpredictable "command enterprise" . . . Even if a sizeable number of present command enter­ prises is converted into monopolistic enterprises, the organization of production (and of consumption) in Eastern Europe will improve."

Holesovsky |_6Sj] , pp. 86-87; see also BemaSek |_17] * p. 210 for specific taxes and rates. All enterprises were to be taxed uniformly.

§ik LH9]. P- 66.

A firm's success indicator was to be based on its gross re­ ceipts. The new "rules of the game" included a complex set of deductions from gross revenue to be the source of various en­ terprise funds or paid to the state (see for example, Kocanda

L 85] » PP* 13-15* or KoleSovsky [6?], pp. 85-96). Unfortunately, the rats of return which enterprises were supposed to maximize was not stated explicitly. This led to confusion about the ex­ act criterion of effectiveness. For example, Bemasek states,

L17] , p. 210, that gross receipts were to be maximized. 49 Howevor, ultimately it was shown that the proper interpretation

for firms was that they should maximize net sales after taxes,

or minimize any assets or inputs which did not increase net

sales (Holesovsky L 6 9 J » P» 8 4 )*

92 See also Marczewski j_9^] » PP* 93-94.

93 Sik LH9]. PP* 66-6 9 .

94 Ibid., p. 69.

95 Ibid., pp. 69-72.

96 Ibid., pp. 72-74. Only portions of the third reform were im­

plemented, e.g., decentralization of investment. Host of the

third reform was still in the theoretical stage when the Soviet

Union intervened to quash the initial implementation of the

first two reforms. For further discussion of this particular

reform and the new role forseen for the plan, see Kocanda Lsj] ,

pp. 12—15, Kosta PP* 182-184.

97 ESS, 1968 (_ 135] t PP. 88-90, and ESE. 1971 L135] , pp. 51-53.

Moreover, recalling the 5 percent rate in 1965» it is possible

that the high growth rate of 1966 did not reflect the long run

t m n d .

98 ESE. 1968 [135] , P. 112.

99 Ibid., p. 90. These imports were financed orimarily from bal­

ance of payments surpluses with other CMKA nations from earlier

years.

100 Kosta [84 !, pp. 192-193. Holesovsky L£9j, p. 8 8 , estimated

that the age distribution of the Czechoslovak capital stock

was two to three times older than in capitalist countries due 50

to previous investment policies which did not emphasize replace­

ment .

101 Karczewgki [_96~, p. 94. ESE. 196 Q [1551, p. 112, lists 1968

estimates of the anticipated price increase of 19 percent but

29 percent actual increase.

102 Sik L119], P. 6 5 .

103 See ESB. 1968 L1551* PP* 112-113* for discussion of the differ­

ential impact of the dual channel price (i.e., based on markups

for both capital and labor) on taxes paid by enterprises. Also

discussed are various adjustments made after 1968 to the tax

structure in an attempt to control exces3 profits and the in­

itial suggestions for the comprehensive reform undertaken in

1970.

104 Marczewski L96 ] , p. 95*

105 Ibid., pp. 89-90.

106 Ibid., pp. 90-91

107 BernliSek [171, PP* 215-216. Note that indicative "guidelines"

had been issued since 1967 in place of annual plans (Holesovsky

l_70] , p. 41).

108 For a description of the Fifth FYP, 1971-1975, a^d specific

targets, see ESE. 1971 [1351 * Chapter 3*

1°9 ESE, 1968 [155]* P* 114.

110 Holesovsky [10], pp. 42-45* On pp. 43-47 he discusses issues

which wsre topical among Czechoslovak economists in the early

1970's: methods to increase technological advancement, pro­

motion of vertical integration, specialization for the world 51

mp.r'f.et, increr.sin~ the quality of basic economic datae

111 Marczevr3ki L9^”i » P» 9^.

112 EHH, 1972 i.135]. P. 52. CLATTER XI

THE CZECHOSLOVAK ECONOMIC DATA BASE

Introduction

In this chapter a discussion of the Czechoslovak Economic Data

Ease (CEDfi) is presented. In compiling the CEDB three objectives have been accomplished.

1. Time series data on major aggregate economic variables have been organized in an easily identifiable and retrievable form.

2. Available data have been used in order to minimize data con­ struction.

3. The problem of missing data has been handled with consistent and defensible econometric techniques.

The following sections of thia chapter describe how these ob­ jectives were met. Data required for the estimation of the Czechoslovak

Econometric Model (CEM), the basic reason for constructing the CEDB, are described briefly In the first section. The second section provides the framework of the Czechoslovak national accounting scheme which is re­ flected in many of the variables in the CEM. The third section contains a discussion of general problems in using socialist data and of specific problems with the Czechoslovak data. A statistical solution to the problem of missing observations by related series is presented in the fourth section. Finally, the CEDE listing Is described and explained.

52 53 Data Regulrecenta of the CLM

The data requirements for estimating the equations of the CLM are straightforward.^ In general, data on aggregate economic variables in each of the following sectors were required: investment, money, government revenues and expenditures, foreign trade, national income or national product, employment, demography (Including population by loca­ tion, labor force by sector and migration), personal Income, consump­ tion and savings. Furthermore, as many sectors as possible were to be subdivided into three broad industrial classifications: manufacturing, 2 agriculture and all other nonagrlcultural, non-manufacturing industries.

Because the CLM was to be descriptive and historically based, time series data were required for all variables* As for any historical econometric model, the time series were required to have the same per­ iodicity and to maintain consistent definitions over their range. Zhe 3 available data were annual and the range of the series covered the years

1953 to 1972. The initial year, 1953, was chosen because it was the first year in which the new crown was used. Data from previous years may not be comparable due to the combined currency and price reforms.

Moreover, as discussed in Chapter 1, by 1953 the major structural shifts in the Czechoslovak economy had subsided, freeing the aggregate economy from large intersectoral, monetary and physical shifts.

The choice of 1972 as the terminal year of the estimation period was made primarily on the basis of data availability. An additional consideration, however, was the inception of the federal system in late

196cJ which had become fully operational by 1972. With the institution of the federal system, the planners had begun to redress more completely than ever before the regional differences between the Czech and Slovak lands. Basically, the Czech territory was highly Industrialized, had a skilled and more productive labor force and required less social over­ head capital for investment projects. However, the Czech Republic suf­ fered from a chronic labor shortage. On the other hand, Slovakia had been the less developed area with an ample labor supply. Previous at­ tempts to accelerate the industrialization or "equalization" of Slovakia had not received the high level of commitment entailed in federalization.

The implications of the shift in regional investment priorities and sub­ sequent changes in the returns to that investment are additional reasons for choosing 1972 as the final year of the estimation period.

The variables of the C£M were specified in real or physical terms.

Thus, time series had to be found in or transformed to real measures.

The unit of measure for all demographic variables was arbitrarily chosen as one thousand persons. For all monetary variables the units of me a— sure were billions of 1967 Kcs.~* The base year 1967 was the latest a- vallable in Statlsticka rofcenkai CSSR [45], the major source of data*

The consistent use of real or constant crown data required price de­ flators to convert nominal or current data to the 1967 base form. All price series were measured as indices with 1967 - 100.0.

From the original set of variables specified for the CEM, a final operational set of time series evolved and is listed in the CEDB. Defi­ nitional problems and data availability, discussed below, contributed to the final choices of time series which were used to estimate the CEM. 55

The Czechoslovak National Income Accounts

Introduction

This section presents the basic framework of the national in­ come accounting scheme used in Czechoslovakia.^ Social product (SP; spole£ensky produkt) and national income (NX; narodnf duchod) are tne

two main aggregate indicators calculated for annual Czechoslovak pro­ duction. After a brief discussion of the Czechoslovak interpretation of "productionthe concepts and coverage of SP and NI, as well as their major components, will be examined in detail. No attempt will be made here to compare the Czechoslovak system of national accounting with West­ ern methods; several complete studies have been devoted to recomputing aggregate economic measures for Czechoslovakia according to Western def- 7 initiona.

The reader who is familiar with various western national income accounting schemes will find that Czechoslovak practice is considerably D different. The primary purpose of Czechoslovak economists in computing and publishing national Income tables is "to provide information about the value of the aggregates for a given time period" as opposed to quantitatively describing the past to establish an empirical base for 9. 10 forecasts and policy analyses. * Moreover, the

"national income and expenditure accounts form ... only a part of a wider system of so-called "national balances of the economy," which Includes the balance of individual money incomes and expenditure of the population, the man­ power balance and numerous material balances for selected raw materials and semi-finished goods. The published national income and expenditure estimates have been sub­ sidiary in importance to such, more detailed, calculations used as tools for economic planning and policy implementa­ tion in these countries. Their construction has therefore been influenced in the past far more by considerations of j 6

the needs of the economic planners ... than by the desire to construct either indicators of the rates of growth of over-all and sector outputs and expenditures, or mirrors of the structure of the economy* for their own sake; con­ siderations of international comparability have received still less weight.

Material Versus Nonmaterial Production

As will be further discussed below, both SP and Nl are constructed from the production side of the economy, rather than from income or pay­ ments to productive factors. In fact, all socialist national accounting systems rely on the "material production" approach in calculating econ­ omic aggregates. Theoretically, the boundaries of Czechoslovak produc­ tion, as measured by SP and Nl, are delineated by the Marxian concepts of "productive" and "nonproductive" labor. Productive labor is that which results in the acquisition of raw materials (i.e., goods of nature), In their processing into material products or in the distribution of these 1 9 products. "Production," then, involves only tangible or material products and includes the activities of the following sectors for national income accounting purposes; 13

Agriculture

Forestry

Industry (mining, manufacturing and public utilities)

Construction

Industrial supply (wholesale trade)

Trade (retail) and public catering

Freight transportation

Communications required for production

Agricultural procurement (agricultural wholesale trade)

Miscellaneous other productive sectors 57

The nonproductive or nonmaterlal production sectors of the economy, not 14 Included in SP or Nl, are:

Communal services

bousing

Passenger transportation

Communications serving households or nonmaterlal sectors

Education, culture, sports and physical education

Health

Research and science

State administration

Banking, Insurance, legal services

In order to estimate material production, Czechoslovak economists exclude nonmarket production, specifically that of housewives. However, following western practice, production and processing of food and other agricultural raw materials on collective and state farms for own con­ sumption are included in estimates of material production* Similar es­ timates for private farms have not been Included due to the difficulty in obtaining data* Other activities encompassed In estimates of SP and

Nl are private dwelling construction by the Inhabitantsthe "col­ lecting and selling of second-hand materials, picking of berries In forests and hunting."^

While Czechoslovak statisticians attempt to be exacting about the activities included in material production, they cannot avoid some arbitrariness and inconsistency. Often both productive and nonproduc­ tive services are provided by the same enterprise, particularly in the 17 transportation, e.g., railway, and communications, e.g., post office 58 or telephone, branches. For these two sectors, the Czechoslovak nation­ al accounts Follow the Soviet model and separate the productive services, albeit arbitrarily, from nonproductive services. Laundry enterprises, however, which provide both types of services are considered by conven- 18 tlon as nonproductive.

"Of still more general importance is the drawing of a de­ marcation line between productive and nonproductive workers in a predominatly productive sector. Since this presents insuperable difficulty in the present state of enterprise accounting and statistical reporting, the principle is generally adopted that all personnel constituting the pro­ duction "team" are considered to be productive. This means that work performed by an enterprise's salaried em­ ployees , guards, messengers, etc., is counted in produc­ tion, but not, for instance, services provided by medi­ cal personnel attached to the enterprise."*®

Social Product and National Income

Social product (SP) is defined as the value of total gross mater­ ial production for the productive sectors listed above and is obtained 19 by summing the final production of enterprises in those sectors. Be­ cause SP Involves gross, rather than net, production, some outputs, i.e., intermediate products, are counted more than once. The existence of double-counting raises questions about the validity of SP as a measure of aggregate economic activity because other factors than changes in actual production influence the growth of SP. For example, the degree of double-counting in SP varies directly with the degree of specializa­ tion of production. The larger the number of intermediate outputs pro­ duced, the greater the degree of double-counting and, hence, the larger is SP.20

Moreover, the coverage of SP (or "global product"— see footnote

18) across Industries is not uniform due to different methods of calcu­ lation. 59

"In industry the so-called factory method is used. This means that the output of the factory is Included in the global product (as well as the Increase of stocks in the factory) even if it is then consumed for further production in another industrial plant. However goods used for fur­ ther production in the same factory, are not Included in the "global product" since obviously internal turnover be­ tween the individual workshops and departments of the same factory is not included using the factory method.

In the building Industry the so-called branch method is used. This means that the "global product" is conceived as the final product of the branch as a whole, and the de­ liveries from one building enterprise to another which constitute the internal turnover within the branch are ex­ cluded.

Finally in agriculture the method of the so-called gross turnover is used. This means that all output is included in the "global product," regardless of whether It will be used for further production in the same or another agricultural enterprise, or used outside the branch. Thus most double-counting Is involved In the global product of agriculture, and least— eesent!ally none, in fact— in the global product of the building in­ dustry."21

While SP has been used extensively in central planning, its pri­ mary statistical importance in the national accounts is that it serveB 22 as the basis for calculating national income (Nl). Essentially, Nl 23 equals SP net of double-counted production and for this reason is often

called "net material product" (NMP).2* Nl is approximately equivalent 25 to western value added; the differences are discussed below. Nl is 22 estimated by deducting from SP the material inputs, i.e.. Intermediate material products which are also referred to as "material cost of pro- duction," Material costa, including those for "raw materials, fuel, energy, material semi-products and depreciation costs,"21 are estimated as

"the value of purchases by firms from other firms in the material product sector. Material cost does not include 60

purchases from the nonmaterlal sector, and these latter purchases indeed appear in the national Income (net mater­ ial product) of the purchasing sector simply because they were not subtracted from the social product* Thus the re­ sidual "net material product" national income Includes the usual components of value added (wages, salaries, profits) as well as indirect taxes and the values of all "nonmater- ial" services that have been purchased by material sectors, these services Include primarily bank services and real estate services. This means that the official national income includes all rents and interest payments paid by the material sectors of the econonqr."*®

Nl is calculated in both current and constant prices. For the compilation of constant price Nl, the material inputs and outputs of 29 enterprises are valued at base year prices. Several different base years have been used, primarily (April) 1956, (April) 1960 and (January)

1967.3^ When the base year has been changed, generally estimates for only one year in both the new and old base year prices have been pub- 31 lished. In constructing time series for Nl, this raises the problem for the western economist of the adjustment of other previous years to the new base year.

Because of discrepancies between Czechoslovak domestic and world prices and between the domestic valuation of Imports and exports, the method for Including foreign trade in Nl estimates differs consider— 32 ably from the method used to measure other productive activities.

Czechoslovak practice has been to

"divide the foreign trade balance in domestic prices into two parts: the surplus or deficit in foreign exchange converted into domestic prices; and the balanced part of trade in foreign trade prices also converted into domestic prices. The foreign exchange ia converted into domestic prices at the ratio of domestic to foreign trade prices of exports If there is a surplus, and at the import ratio if there is a deficit."^ 61

Far example, If a surplus exists

D D D D X - D M - (F X - F M)-~ + F M(— ----) x m x m F m F F X X ITS where D - domestic prices of exports, x, and imports, m;

F *■ foreign prices of exports, x, and Imports, m;

X ■* quantity of exports;

M - quantity of imports.

Then the portion of the surplus denoted by the right-most term, called the “gross output of foreign trade,*1 is included in NX. A similar com­ ponent is included in Nl if a deficit exists (see Holzman, [72], p. 60, equation 2).

Five different divisions of Nl are compiled annually by the

Czechoslovak Federal Statistical Office (formerly the State Statistical

Office). These are published as separate tables in Statisticka rocenka:

C5SR [45] showing: Nl originating (1) by industry, i.e., economic sec­ tor and (2) by social sector or enterprise ownership; Nl distributed to employees and enterprises, (3) by economic sector and (4) by social sector; (5) Nl distributed by final use. The components of each break­ down are described below and are illustrated in Figures 2*1, 2.2 and 2.3.

Of the two divisions of Nl originating (see Figure 2.1), the one by economic sector or industry is most similar to Western-type ac— 34 counts, Nl is disaggregated by as many as the ten industries listed 35 above or by as few as six industries* In the latter case, agriculture and forestry are paired as are transportation and communication. Also,

Industrial and agricultural wholesale trade are combined with the mis­ cellaneous productive sectors* In any case, Nl originating in a National Income Originating By Economic Sector

Agricu^Lture Transpoi'tation Retail Trade Other Prc)ductive Indusitry Constniction & 8: SC Sectc>rs Foresitry Communic.at ions Public Ctit e ring

1 > 1 i r » t ii F nat:tONAL INCOME PRODUC:ed I i < i*

State En terprises Cooper«itives

Personal Holdings Socialist Sector Private Sectors Of The Population

National Income Originating By Social Sector

FIGURE 2.1 NATIONAL INCOME ORIGINATING BY ECONOMIC AND SOCIAL SECTOR Primary Distribution Of National Income By Economic Sector

Agriculture Transportation Retail Trade Other Productive Industry Construction & & & Sectors Forestry Communications Public Catering

1 i [ 3 ][ j 1[ c I C I £ I 13 i ii ii i1 t i t J>

DISTRIBUTION OF NA1TONAL INCCME PRODUCED

i \> \> 1' i' i i c ][ S ] £

State Enterprises Cooperatives

Personal Holdings Socialist Sector Private Sectors Of The Population

Primary Distribution Of National Income By Social Sector

I = Payments to individuals S = Payments to society FIGURE 2.2 PRIMARY DISTRIBUTION OF NATIONAL INCOME BY ECONOMIC AND SOCIAL SECTOR Agriculture Transportation Retail Trade Other Productive Industry Construction & & & Sectors Forestry Communications Public Catering

NATIONAL INCOME PRODUCED

DISTRIBUTION OF NATIONAL INCOME BY END USE

* Retail Ag.Mkt. Constat. Othr.Prs Foreign Purchs. Purchs. In Kind Consmt. Trade Material Increase Change In Change In Correction Personal Consumption Social In Fixed Noncompletec (export Inventories Consumption Assets Constructior surplus shown)

Nonproductive Consumption Accumulation Losses

FIGURE 2.3 FROM NATIONAL INCOME ORIGINATING BY INDUSTRY o- TO OHE END USES OF NATIONAL INCOME specific industry includes all the items discussed above for aggregate

NX, In particular, purchases of nonmaterial services and indirect taxes.

The turnover tax is the major indirect tax which, in addition to the purchase of nonmaterial services, distinguishes NI originating by industry from western value added by Industry.

“It is customary in the Czechoslovak accounting to include the value of turnover tax as being "produced" by the sec­ tor which finally produces the commodities that are taxed, regardless of who actually collects or pays the tax. The practice, then, has been to add almost the whole amount of indirect taxes collected to the net output of manufactur­ ing, mining, and utilities, that is, the sector usually referred to simply as "industry." In this way the statis­ ticians avoid the issue of deciding how much of a tax lev­ ied on, e.g., a can of beans, to attribute to agriculture which produced the beans, or to industry which produced the can and processed the beans. As a result of this practice, the structure of national income by origin in Czechoslo­ vakia, as In all East European countries, is heavily weighted in favor of Industry as opposed to other sectors. It is not unusual to read that 60 percent of the total output of a country has been produced by Industry in Eastern Europe, while no more than 30 percent is the usual contribution by industry to total output in the rich countries of Western Europe and the United States."^

The other listing of NI originating is divided by "social sec­ tor, "^7 a concept found in national accounts based on the Soviet model.

The ownership of a productive enterprise determines the social sector to which it belongs. The largest is the socialist or socialised sector which is comprised of state-owned enterprises and cooperative enter­ prises. Currently in Czechoslovakia there are "Industrial, construction, agricultural (unified Agricultural Cooperatives), forestry, transport, procurement, commercial (consumers' cooperatives) and publishers' cooper­ atives."27 The two other social sectors which have relatively small contributions to NI are primarily private "Personal holdings of the population are private land al­ located to members of the Unified Agricultural Co-operatives which otherwise work together on the co-op fields and all agricultural holdings of the rest of the population meas­ uring not more than 0.5 ha of agricultural land and indivi­ dual , privately owned houses."2 '

Finally, the private sector includes "agricultural farms belonging to private persons and measuring more than 0.5 ha, privately operated crafts, transport, shops and pubs,"22 HI originating from these types of enterprises is illustrated in Figure 2.1.

The "primary" distribution of NI in the form of gross payments made directly to employees and to society is illustrated in Figure 2.2, 38 The distribution is disaggregated by both economic and social sectors, as defined above. Payments to employees are gross wages; payments to society represent enterprises' retained income plus income transferred to the government.

More familiar to Western economists is the distribution of NI by end use (see Figure 2.3), detailing the portions of net material pro­ duction consumed or used to augment the capital stock. In Marxist terms 39 the former end use is referred to as nonproductive consumption be­ cause NI so used has not served to expand production or productive ca- AO pacity. NI added to the capital stock is designated as accumulation.

The final component of NI by end use is called "losses" or more com­ pletely "material losses in the national economy” (hraotne ztratry v narodnim hospodarstvi). Unfortunately, no explanation beyond the numer— 26 leal estimates of this term is available in the standard sources.

Generally NI originating does not equal the sum of these three components of NI by end u s e ^ because the latter Includes only domestic final uses whereas the former includes both domestic and foreign origins of NI. 07

"The difference is— besides the usual statistical dis­ crepancy— net export of goods and material services {i.e., material production]. That is, if Czechoslovakia exports more than it imports during the accounting period, the national income used will be smaller than national income produced.

Figure 2.3 describes the flow of NX from its origin to its final dis­

tribution; the correction for foreign trade is shown although it is not

listed in official statistics.^

The further subdivision and coverage of the two major components mentioned above are as follows: nonproductive consumption includes all

of NI expended by households, "personal consumption," and the nonproduc­

tive sectors, "material social consumption.Personal consumption covers goods purchased in retail and agricultural markets, goods pro­ duced by the consumer's own activity and goods supplied by enterprises as payment in kind (i.e., consumption in klnd).^ Private housing ex­ penditures such as depreciation and operating or maintenance costs are subsumed in other personal consumption. Social consumption of material production accounts for the value of NI actually consumed in the provi­ sion of social and public services, Including public housing expenses, by nonmaterial branches. The NX bought by these branches but not con­ sumed is considered as an addition to inventory, * part of accumulation rather than social consumption.

Finally, accumulation (akumulace) is

"that part of production [NX] which has been added to the capital stock after accounting for the dlmlnuation of the capital stock caused by productive activity. The termi­ nology used in the West would describe this part of out­ put as net domestic investment."""

Accumulation is divided into three parts: "The increase In fixed assets 63

(net of depreciation), the change in unfinished construction and the t changes in circulation funds, inventories and reserves*" As mentioned above for nonmaterial inventories, the three subdivisions of accumula- tion encompass both productive and nonproductive end uses of NI. 48

I roblems With the Data

Introduction

because the primary goal of this study was to develop an econo­ metric model of the Czechoslovak economy, the decision was made to mini­ mize data construction by accepting available data wherever possible.

This operational decision eliminated by assumption many problems under­ lying the use of available socialist data. However, these problems were not completely ignored in selecting particular series. Wherever possible the quality of series was judged on the basis of other information available and the investigator's admittedly subjective opinion of the series* validity.

In this section an overview is presented of general problems of definition, quality and availability encountered in the use of socialist data. No attempt will be made to cover the subject in depth because it 49 has been amply explored elsewhere. After the summary of general con­ ceptual problems, specific problems encountered with the Czechoslovak data are discussed.

Three General Sources of Data Iroblems

In this sub-section a brief interpretation of the general sources of problems for users of available data is presented. Operation­ al, institutional and ideological differences in statistics-Issuing or­ ganizations account for problems with available data or the lack, of it. t>9

Nany specific difficulties associated with the general problems of definition and quality, discussed below, are not unique to available data of socialist origin. Daily operating practice and constraints

(e.g., budget) of different statistical agencies cause problems for data users not Intimately familiar with the originating agency. These oper­ ational causes are independent of the statistical agency's ideological or institutional orientation. No covert motive need be ascribed to socialist statisticians simply because they do not provide exact defi­ nitions of their data or because their definitions of economic terms differ from non-socialist Western usage. Generally, economists formu­ late empirical definitions on the basis of research objectives; differ­ ent objectives lead to different definitions. As a specific example, the U.S. Bureau of Labor Statistics (USDLS) does not define and esti­ mate agricultural employment in the same way as the U.S. Department of

Agriculture (USDA). The USLLS only considers full-time farmers in their statistics whereas the US DA includes all persons Involved in farming regardless of primary occupation. It should not be surprising, then, if the Czechoslovak Federal Statistical Office were to have a third definition and estimation procedure for agricultural employment to suit their needs.

Another important general cause of problems with available data are institutional characteristics of the economy. The most notable in­ stitutional aspect of socialist economies which begets data problems for non-socialist researchers is central planning. Many differences in definition between socialist and non-socialist terms are traceable to the existence of central planning. For example, socialist prices. 70 entirely different from market determined prices, are fixed by the

central planning bureaucracy. Socialist profits, as discussed below, depend on the pricing policies and priorities of the central planners rather than a market determined rate of return on capital.

Finally, insofar as Marxian ideology has been institutionalized, i.e., througn the required adoption of Marxian economics throughout socialist economic and political institutions, there is an overlap be­ tween the institutional and ideological roots of socialist data prob­ lems. however, many differences in definition of economic terms are solely the result of the ideological orientation of socialist economies.

Marxist economic analysis is the only one officially tolerated in all

COMECON nations and therefore economic variables are defined in a man­ ner consistent with Marxist categories. The resulting distinctions made, e.g., productive versus nonproductive activities or social versus pri­ vate consumption, are often unfamiliar to non-Marxist economists. In­ cluded in the ideological sphere are political contributions to data problems, e.g., of bias or outright exaggeration of data or adoption of poor quality estimates simply to reinforce some politically desirable conclusions. The most obvious political influence on data occurs when access to the data is limited for political reasons. Either omission of estimates with explicit military significance or omission of specific definitions which reveal information about the military components of estimates is understandable. Censorship of other economic data, e.g., the Romanian national product, has no clear logic other than bureau­ cratic or ideological paranoia.^® 71

Definitional Problems

When data are available and accepted, both the conceptual and

the statistical definition of the variable are Implicitly accepted as well. Problems for the exacting researcher arise immediately. Most often the precise definition^ of a particular series simply is not

known. From sources other than the originating statistical agency one

is forced to work backwards from the data to a plausible surrogate def­

inition. Without the original definition, direct checks on the internal

consistency, e.g., for changes in coverage, are impossible.

Even if a definition of the variable in question is available

from the statistical agency, difficulties may arise. Socialist econo­ mists employ many concepts which differ significantly from economic 52 categories utilized by western economists. For example, net material

product (NMF) is similar to the western gross national product (GNP)

concept, because both are overall measures of economic activity* How­

ever, they are in no way equivalent by western income accounting stan­

dards. NMP differs from GNP in that certain services, those considered

nonproductive, are omitted from NMP. Freight shipments to or from

enterprises are included in NMP as productive transportation services whereas passenger travel for pleasure are not. Or, the services pro­

vided by salaried enterprises employees, guards and messengers are con­

sidered to contribute to productive activity, and thus NMP, but medical

personuel of the enterprise are not. Lack of familiarity with social­

ist economic terms, e.g., productive and nonproductive activities may

lead to incorrect use of data based on those concepts. However, the

solution to this type of problem is careful attention to the definition,

if it is available. 72

A closely related problem occurs when a particular term has more than one definition and, hence, more than one set of estimates.

The multiplicity of definitions arises from differences in analyses either among socialist economists or between socialist and non-sociallst c 3 economists. As an example of the former case, Feshbach cites two

Soviet economists who estimated collective farmers' labor; one used a

250-day man-year and the other a 280-day man-year. One empirical but impractical solution to such disagreements among socialist statisticians would be to travel to the particular area and measure the variable in question. The high cost (e.g., of travel to the Soviet Union to survey farmers) to the researcher using available data to verify one particular estimate warrants a value judgement about the "better" estimate. Other disagreements among socialist economists may arise from different in­ terpretations of Marxist economics and the western researcher must re­ solve these with a similar value judgement of the "better" data.

As discussed above, definition and measurement of specific con­ cepts vary from one socialist Investigator to another. However* the most noticeable variances from the western viewpoint, occur between socialist and non-socialist economists. For example, since the mld-

1960*s the meaning and measurement of "profits" have been the center of intense controversy in many socialist economies, especially in those 54 instituting economic reforms. As discussed in Chapter 1, the changing role of profits was a key factor in the 1967 reforms in Czechoslovakia.

Thus, not only ha-e socialist economists had different definitions for

"profits," but th*ir definitions have differed from the western concept.

Cohn warns that within the context of central planning "profits" 73

cannot be interpreted in a western sense because "the [socialist] rate

of profits is more a function of pricing policy than a return to cap­

ital."**** Another example of the differences betveen western and social­

ist definitions are conceptual differences in national accounting schemes.**® These differences received a great deal of attention up to

the jnid-1960's.

"In addition to the usual challenges facing national income estimates, the user of Soviet [socialist] statis­ tics must confront the additional obstacles of the absence of recent comprehensive national accounts in the western fashion [because of the reliance on Marxian economic con­ cepts], the high proportion of income-in—kind [because of economic activities outside the market], and the unusually heavy role played by indirect taxation.1'^'

In using socialist data, then, care must be taken to avoid confusion be­ tween the western interpretation for an economic term and the socialist definition originally used to generate the data. If the definitions are confused, any useful information content of the data will be garbled, at best; at worst, the data will not correspond econometrically to any meaningful economic concept.

Quality Problems'*®

Given that an acceptable definition for a particular series is available, the quality of the available data is still open to question.

It is assumed that in accepting an available data series, such unidenti­ fied problems as changing coverage, price distortions, large measure­ ment errors, improper statistical techniques, political biases (e.g., 59 exaggeration or minimization) or changes in consistent political biases,*'7 have not seriously affected the estimates. Socialist economists admit to the existence of some of these problems. For instance. 74

"... the statistics [for Soviet agricultural labor force] are necessarily both imperfect and incomplete. Soviet [socialist] official statisticians must know how rough their own figures are, since, in so far as they relate to estimates in terns of annual average or man-years, tney are apt to give them to the nearest million,1

'fiius, a value judgement about the sufficiency of the quality of any time series is required before using the data. The purpose of the data, cor­ respondence between the conceptual and operational definitions, the par­ ticular model for which the data is intended, the margin of error allowed in conclusions from the data, are factors which must be considered in such a decision.

In conclusion, this overview has attempted to summarize the as­ sumptions implicitly made in accepting available socialist data. The existence of these general definitional and quality problems with their underlying causes of operational, institutional and ideological differ­ ences between economies is acknowledged for the data series used in this study.

Specific Problems with Czechoslovak Data

Beyond the general problems discussed above, the major problems specific to the Czechoslovak data are related to the availability of the data. Some series required for the original version of the CEM were not found, others were very elusive. For the former group, there simply were no available data. No correspondence could be identified between the conceptual definition initially specified for the CEM and available data on reasonable proxies. Examples of these variables are money de­ mand, wholesale prices and government expenditures on goods and services 75

net of investment. The solution for these entirely missing series vas

to respecify the relevant equations of the CEM, omitting those variables.

Such a drastic solution was not necessary, fortunately, for

several other series which had a limited degree of availability.^

Either the series itself was found or a reasonable proxy was calculated

from other available data. For example, data on currency holdings of

private individuals were found in a Czech journal article (see Appendix

B for data sources) and serves as a proxy for the money supply. As

another example, data on population in rural and urban areas were only

available for census years (1950, 1961, 1970) from U.N. sources (see

Appendix U). Some of the remaining years were filled in from a variety

of sources including a Russian CMEA statistical yearbook and a Czech 62 demographic statistical compendium, declassified in 1973. From this

demographic source, data on the movement of population were available

to calculate net urban migration. For a final example, from available

current and constant 1967 Kcs. data implicit national income price de­

flators were calculated. These deflators by major industrial sector do not appear as explicit variables in the CEM, but were used to transform

other data, e.g., in current Kgs,, to constant 1967 K£s.

As in the case of rural and urban population, described above,

most series were compiled from several sources, at least from several

issues of Statisticka roEenka: EsSR. The consistency of estimates be­

tween two different issues was checked by comparing observations for

identical dates. When the estimates were consistent, the older and the

newer data could be joined together to form a more complete series.

However, the Czechoslovak Federal Statistical Office changed the base 76 years of constant price data several times. When, tnese changes appeared in Statistika roSenka: SSSR, little explanation was given other than to include overlapping estimates for one or two years of the new baae year 61 estimates and the old. In order to splice the two series together, a constant relationship between base year prices was assumed* The simple ratio between the overlapping estimates was used to transform 64 the old base year data to the new base year.

Even when these problems of finding the available data and man­ ipulating that data were solved, many of the resulting series still were not complete over the required range, 1953-1972* The solution to this problem is described in the next section.

The Problem of Missing Data

Introduction

In this section, the major problem encountered with the use of available Czechoslovak data,*’'* the problem of incomplete observations, is discussed. Missing data are first classified by major type accord­ ing to their relationship with available data. From the relevant lit­ erature, a general solution to the problem was adopted in which the in­ complete series Is related to a similar but complete aeries. In order to generate the missing data this solution required the combination of the generalized best linear unbiased estimator and the assumption of no serial correlation.

At this point, two implicit assumptions underlying the discus­ sion of this section should be noted. The need for a statistical pro­ cedure to generate missing observations assumes that those observations: 77 1* cannot be found and, I* cannot be reconstructed {because original definitions and/or basic data are not available). Obviously, the best solution to missing data is to find them, however, once the search cost, in terms of either time or in money, exceeds a reasonable limit, admittedly subjective and dependent on the end use of the data, the

"best" solution to the problem becomes an open question. Thus, in this study all reasonable efforts were made to find the data before resort­ ing to secondary statistical methods to generate proxy values for mis­ sing observations.

Extrapolation, Distribution and Interpolation

Three types of problems can arise when data are missing. First, the missing observations may fall outside the available sample. For example, annual data may be available for only 1960-1970, although re­ quired for 1950-1975; data for 1950-1959 and 1971-1975 are missing. To find data for these periods outside the period of available data is a problem of extrapolation* A second problem, distribution, requires the allocation of a total amount for a given time period over several shorter ones. For example, five-year totals of a variable are available but data for the individual years are not. For another example, annual totals of some variables are available, but quarterly data (which would sum to the annual total) are not. The final problem is Interpolation, to fill in missing values between available observations at regularly or irregularly spaced intervals. For example, annual data for 1950-1975 are needed but only 1950, 1955, 1965-1975 are available. The series in the CKDB have entailed the first and third problems; interpolation of irregularly spaced data was the most frequent problem encountered. When 7S

outside the available sample, missing observations most often occurred

in the earlier years, e.g., 1953-1960, rather than later ones, e.g.,

1965-1972.

The Solution by Related Series

The problem of missing data has received a great deal of atten­

tion from empirical economists and a number of solutions to the problem

have been suggested.^ One such method is estimation by related series.

The basic objective is to find a series which:

1. Has no missing observations over the required sample period.

2 . Is related to the series with missing data by underlying

economic forces which influence both series in similar man­

ner; i.e., the investigator believes the two series are

highly correlated.

Then the movement and level of the related series is used to approximate missing values. The major problem with this method is to find such a

series. Typically, authors side-step this crucial question by assuming

the existence of a related series or the clear-cut choice among alter­ native series. Nevertheless, related series have been found for all

series with missing observations in the CEDB. Both the related series and the criteria used to choose among alternates are discussed below.

Friedman's exposition [49] of estimation of missing observations by related series reviews and generalizes upon the many ad hoc non­

stochastic procedures in use prior to 1962. Also, included is a dis- 21 cussion of the use of OLS regression in relating the two series and

interpolating missing observations. Friedman judged the ordinary least

squares (OLS) regression method superior to non-stochastic methods. 79

Although he recognized that the problems of Interpolation, distribution and extrapolation were interrelated, he was not able to unify their

analyses*

Chow and Lin [30] built on Friedman's observations of the rela­ tion among the three problems and formulated a general stochastic an­ alysis utilizing matrix algebra and the generalized least squares (CLS) estimator. Their method combined with some simplifying assumptions is the basis for the estimation of missing data in the CEDB. For exposi­ tions! simplicity, Chow and Lin deal only with the conversion of quar­ terly to monthly data:

"Throughout this paper, we will speak only of esti­ mating a monthly series given its quarterly data and monthly data on related series. The theory, with very minor modifications, obviously applies to the estima­ tion of quarterly series from annual data, etc. A time series, for a specified time, is a random variable. We speak of "estimating" the value of a fixed parameter as is often the case in statistics.

Even though they deal with regular Intervals of months and quarters, their solution is general and encompasses irregularly spaced missing data,

"It is assumed that the monthly observations (if available) of the series to be estimated satisfy a multiple regression relationship with p related series x^,.*., Xp. During the sample period of 3n months [over n quarters] the relation is

+ u (1)

where is 3nx 1, X is 3n xp, and a is a random vector with mean 0 and covariance matrix V. ...

Let C be the n x 3n matrix that converts the 3n monthly observations Into n quarterly observations* ... The vector of n quarterly observations of the dependent variable, to be subscripted by a dot which signifies being quarterly, will satisfy the regression model 80

- C£ - CJ^3 + Cu » X.|3 + u. (3)

with

Lu.u! - V. - CVC' . (4)

The problem Is to estimate a vector of id observations on the dependent variables , where z_ would be identical with £ In the cases of interpolation and distribution, and would utside the sample period in the

That is, estimate the model

where

Xg * X and ■ u for both interpolation and distribution.

For extrapolation Xz differs from X by the additional observations before or beyond the available ones. The analogous difference holds between u and u.

From this model Chow and Liu derive the following best linear

unbiased estimator (equation 14) for missing observations, whether inter-

polation, distribution or extrapolation is the problem:

(14) where

GLS estimator (15)

(16)

Under the classical conditions of no autocorrelation (discussed below) and identical variance,O'2 , for all disturbances, V - Iff2 and V. ”

CC’cr2. Then for Interpolation and distribution V - C ’ff2, simplifies mi # the estimator to fil jc " X + C ’u. wine re

■ (X*. X.) ^X'.^. ■ OLS estimator

The vector C'^u. contains zero values for those periods with missing ob­ servations. Thus, no adjustment Is made to the estimated values for those periods. For the quarter-to-month problem this amounts to assign­ ing "the regression residual for (the beginning of) any quarter to (the 69 beginning of) the first month of that quarter." Similarly for extra­ polation, V " , reduces the estimator to A • 0

* L * A- Extrapolated data require no correction to the estimated values.

Next, the assumption of no serial correlation is examined.

Briefly stated, the rationale for this assumption is that conceptual, and computational problems exist with an assumption of first or higher orders of autocorrelation. Within the context of a planned economy, institutional factors create complex high-order autocorrelation patterns throughout the economy. The operating philosophy of central planners

Is to make decisions in the present based on past experience in order to achieve future goals. Thus, with the active and continuous partici­ pation of central planners, annual plan3, five year plans and other long range plans simultaneously instigate many different orders of auto­ correlation. While it could be conceptually desirable to include all autocorrelation patterns in V, knowledge of Institutional factors is not sufficient to determine all the appropriate interrelationships.

From the standpoint of specifying the correct relationship be­ tween the related series and the incomplete series with only imperfect Si information, it is not clear that the choice of a specific, higher order of autocorrelation improves upon the assumption of no autocorrelation.

If the wrong order is chosen or the exact interrelationship is incor­ rectly specified (as is possible given the complexity of institutional factors), additional spurious disturbances will be introduced.^ Thus, the true autocorrelation pattern would be obscured more, not less.

Furthermore, an enormous amount of time and computer resources would be necessary to differentiate the proper specification of the order of autocorrelation for every series with missing data.

Moreover, commonly available computer routines can handle at moat only first-order autocorrelation.^ Sophisticated routines such as the

Cochrane-Orcutt (CORC) or Hildreth-Liu procedures included in the Leon- ometric Software Package, require a sample with no missing observations.'72 hence, these routines are limited in their usefulness for interpolation.

In view of the above problems, data interpolation in this Btudy 73 is limited to the case of no autocorrelation. Combining this assump­ tion with Chow and Lin's best linear unbiased estimator leadsto a feasible solution for missing data in the CEDB. Operationally, the fol­ lowing procedures were employed to generate missing observations by re­ lated series.

1. A related variable (or several alternates) was chosen on the basis of its correspondence to the variable with missing data* Rea­ sons for a high degree of correspondence to related variables werei similar operational definitions of the same variable (old definition capital stock for new definition capital stock, mid-year population for year-end population, Investment in 1964 and 1967 Kcs. for investment in 33

1*67 Kcs.); total variables of the same type (total exports for non- agricultural fuel and raw material exports); components of the total

(population movement between CSR and SSR for total movement within CSSR); conceptually similar variables (budgeted taxes and fees for actual taxes and fees). Related series which could not be chosen were those speci­ fied by the structural equations of the CEM. If. for example, the mis­ sing data on an independent variable were generated by the related series of the dependent variable, circularity and unwarranted correlation would be introduced into the CEM equation estimates. In other words, such a choice for a related series would violate the classical assumption of no correlation between the independent variable and the disturbance term.

When no strongly related series existed, a related series was created by lagging one period of the series with missing observations. The first- order autoregressive specification was also included when there were many alternate related series and no clear-cut choice among them.

2. Various specifications of the independent variables (the al­ ternate related series, a time trend, dummy variables for. e.g.. price changes) were estimated for the available sample.

3. Alternative estimates were compared and the one chosen for which the fitted values best approximated the available actual ones.

The criteria for the "best" equation were (in order of Increasing import­ ance) R^. standard errors of the coefficients, standard error of the re­ gression^^ and the fit of the equation around the missing observations.

4. The estimated or fitted values of missing observations from the "best" equation were spliced with the available observations to com­ plete the series. 64

Appendix C lists each series with missing data, the "best" re­

lated series finally used, the regression equation with standard errors

in parentheses below each coefficient, the standard error of the regres-

sion and the R statistic for that equation. The order of the Appendix

follows the order of tne CEDB (Appendix A). All related series are in­

cluded in the CEDB, in some cases on special pages titled "Related

Series:..." The units of the data used in the regression, if different

than the data in the CEDB, are listed with the appropriate series. Ex­

tensive notes accompany Appendix C concerning the estimation of all mis­ sing data.

A description of the CEDB, the final product of the foregoing analysis, Is presented in the next section.

Description of the CEDB

The CEDB is an organized, comprehensive compilation of time series data on aggregate economic and demographic variables pertaining

to the Czechoslovak econony. Two hundred sixty—three time series are

listed in Appendix A. Extensive processing of diverse data, as discussed in the preceding sections, was required to make each series consistent over its time range.

The CEDB was constructed in a computer readable format to facil­

itate estimation of alternate equation specifications for the CEM. Com­ pilation and transformation of raw data into an estimable form required many calculations and transcriptions of each datum. Organizing the CEDB

in computer retrievable form allowed calculation of data and estimation

directly from those calculated data with a minimum possibility of 65

transcription error. Moreover, it is intended in the future to re- estimate the CEM. Once the original groundwork has been laid for the

CEDB. updating each series required for the model is greatly simplified.

Only the new raw data need be organized; once a new datum is included, pre-established routines handle its transformation to final form. Thus,

the initial effort required to organize the data into the CEDB was greater, but future use of the data is simplified.

The listing of the CEDB in Appendix A generally follows the order of the sector division for the CEM. For example, investment series are the first listings and consumption are the last. Each page contains de­ scriptive information about the series on that page. A general descrip­ tion is given in the page title. Each series listed is described in a column heading containing an abbreviated definition and the units of measure. Wherever multiple series are needed to calculate other series, the columns are identified by Roman numerals. At the foot of each column the source of the data is listed for that colunai only. Sources refer­ enced by a number are keyed to the full listing in Appendix B. The major source, nunfeer 2, from which time series were compiled was various annual issues of the official statistical yearbook, Statistlka rocenka:

EsSR [45] and [125]. A "calculated" source indicates that the series 76 has been derived from other data in either the CEDB or listed sources.

With the data in the CEDB, alternate structural equation specifi­ cations were estimated and tested for inclusion in the CEM. A list of the variables required for the CEM appears In Appendix D with their lo­ cation in the CEDB listing (page and column numbers). The choice and in­ terpretation of specific variables in the final version of the CEM is the subject of the next chapter. i.OTES TO CHAPTER XI

1 The original version of the C3'i was specified in terms of theo­

retically defensible variables and only cursory attention was

given to finding operational data series for each, A list of

the original set of variables for which data was needed appeared

in the proposal for this study,

2 The basic reason for distinguishing agricultural and nonagri-

cultural branches was to allow for the socialist tendency to

develop manufacturing at the expense of agriculture. By separ­

ating branches, the model could account for planners' priorities

and the resulting effects on the economy.

3 Recently, Sujan and Kolek l 120] have constructed a quarterly

forecasting model for Czechoslovakia, the first for any COMECON

economy. All other COMECON econometric models to date have

been annual ones, due to limits imposed by available data.

4 At the time of the data search, 1972 was the latest year for

which data were available; there is approximately one and one

half years lag in the availability of Statistlcka roSenkat 5SSR.

j_45~], the major data source. Thus, the end of the data range

was arbitarily chosen as 1972. After the conclusion of this

study, it is intended that the CEDB will be updated and the

CEM re-estima.ted as data availability and time permit. The im­

portance of the federal system will also be considered.

86 87

5 Note that throughout this study the abbreviation "bill." means 9 6 billions, i.e., 10 , and "mill." means millions, i.e., 10 .

6 For a brief sketch of pre-1948 efforts to e.stimte national

product aggregates for Czechoslovakia, see Busek and Spulber

[26], pp. 227-230.

7 See Pesek [109], Michal [93], pp. 221-2J7, KrejSf [05] and La6],

Alton [6]* For a critique of Alton's study from the Czechoslo­

vak viewpoint, see Goldmann and Nachtigal [57j.

8 Moreover, information available in the West about Czechoslovak

national accounting methodology is 3parse at best. Holesovsky,

et. al., [71], p. 158» state regarding their search for docu­

mentation of the construction of Czechoslovak economic aggre­

gates :

"The Czechoslovak sources that have been consulted in connection with this study are very vague, and seem­ ingly secretive about some parts of the national in­ come tables . . . . The actual methodology used is described in very general terms, or omitted completely in the case of more unusual items, such as foreign transactions."

They also note (p. 159) that Czechoslovak practice seems to

parallel that of Poland; this fact could be used to expand upon

available Czechoslovak information by analogy. Two sources not

utilized in this study which can be consulted on the Polish sys­

tem are Feiwel and Wynnyczuk [46] , Chapter IV, or Economic Bul­

letin for Rurooe. 1959* L.133] * PP» 52-60.

9 HoleSovsky, et. al., L7l]* P* 168.

10 However, there is some evidence of interest in the Czechoslovak

national accounts as an analytical tool; see Goldmann [56], 83

11 Scnr.omic Bulletin Tot :Mrope, 1959 (hereafter abbreviated as

5 711') [ 153"] » p. 5?* lee also Holesovsky, et. al., L7lJ, PP« 168-

174, for discussion 0 :" an extensive revision of the Czechoslovak

national accounts proposed during the nid-1 9 6 0 *s reform period.

The revision, which to this author*s knowledge was never en­

acted, was to introduce western-type double entry accounting of

both real and monetary flows. Existing

"Czechoslovak practice has been to divide the real flows and monetary flows into separate tables, thus omitting quite a few aspects of the interrelation among the various sectors of the economy." |_7l], p. 1 6 8 .

12 SHE, L1??]* P- 55* See also Chyba L?2] , pp. 81-84, on

"produktivita prace" (productivity of labor).

13 Holesovsky, et. al.,|_71~, PP. 160, 1 63, Nachtigal U 0?]» P- *67.

and Cap and Dubsky L28], pp. 3 1 , 35.

14 Holesovsky, et. al.,|_71j» P* 167. As is evident from a compar­

ison of the list of productive versus nonproductive sectors,

most services are excluded from national aggregates because

they are not related to material production. This fact contri­

butes to the lack of comparability between socialist and west­

ern measures. See also, 5BH. 1.1551« PP» 55-54*

15 13E, L.133], pp. 53-54.

16 Holesovsky, et. al.,|_7l]i P* 160.

17 See Chyba L32^, pp. 18-19, on "doprava" (transportation).

18 EBS, |_l35~!» p. 54.

Stati sticka rocenka: SSSR 1968 [125] t PP. 144* Social product

is also known as "global product" or "global social product"; 89

see Nachtigal t 103 , P. 167, or Chyba [321 , pp. 109-110, on

"uhrnny spoleCenskv produkc". The similarity, up to the treat­

ment of nonmaterial services, of 3P with the input-output con­

cept of total gross output is noted in E3E. L135 , p# 55*

20 Holesovsky, et. al., u71j , p. 161. Also mentioned as influenc­

ing double-counting is administrative changes within the econ­

omy, but no specific examples are given.

21 Nachtigal L103j» PP* 167-169.

22 Ibid., p. 169.

23 Conversely, SP less III indicates the degree of double-counting.

24 Elaboration on the identity of NI and NKP ia presented in E3E,

Ll33j» p. 55* For this study the two terms will be used inter­

changeably.

25 Holesovsky, et. al., [_71j » P- l6l.

26 See Statisticka rocenka: 6sSR 1968 [1251, p. 144* on "vyrobni

spotreba". Cf., Chyba L?2j, pp. 64-6 6 , on "naklady" (costs or

expenses), specifically "vyrobnf naklady" (productive costs).

27 £ap and Dubsky [20] , p. 31*

20 Holesovsky, et. al., L7lj , PP* 161-162.

29 Ibid., p. 162.

30 E.g., see Statisticka rodenka: CS5H 1968 [12 5 ~], P* ?4» Table

1-1.

31 Ibid., p. 151* Table 6-7; comparable data for 1966 are given in

I960 and 1967 prices.

32 The comments on the inclusion of foreign trade in the Czechoslo­

vak national accounts are based on Kolznan's discussion l 72} 90

of "Soviet practice. The unalo.y is not unreasonable because

in the past Czechoslovak economists nave adhered to the ooviet

model* Nachti.pal ilQ3~' , P« 1671 states that for’oign trade ac- t tivities are included in ill but he does not elaborate on their

sectoral classification. In listings of NI originating: by eco­

nomic sector, discussed below, foreign trade is not distingui­

shed as a separate category. The Soviet nractice, noted by

Holzman ]J2 \ , p. 6 0 , "of valuing exports at domestic wholesale

prices and imports at domestic retail prices" may indicate the

particular sectors to which foreign transactions are assigned*

Assuming that tnose prices denote the appropriate sector, the

wholesale trade branch includes exports and retail trade in­

cludes imports.

33 Holznan \j??., p. 60.

34 See Otatisticka rocenka: CSSR 1968 'L125l, p. 148, ‘Table 6-1,

"vytvoreny nSroini duchod". Also see footnote 52*

35 See Gap and Dubsky 1968 L27] , p. 29» Table 16b.

36 Hole§ovsky, et. al., 171], p. 1 64.

37 See Statisticka rocenka: C3SR 1968 jjl25J , pp. 145, 152, Table

6-9.

38 Ibid., pp, 147, 156, Tables 6-21 and 6-22,

39 Ibid., p. 146.

40 Ibid.; see also Chyba [}2 ', pp. 11-12.

41 Ibid., c.flr., p. 148, Table 6-1. "Dzity narodnf duchod" (use

of national income) is the official designation of NI by end

U3e as published. 91

42 Holesovsky, et. al., [71 , n. 160.

43 Piyure 2.3 is similar to oris published in Ciola pro kasdeho

1963/9 j_l?3 I f inserted between ?a«qes 141 and 145* which does

not include a specific adjustment for foreign trade, however,

division of III by end use in that source does not correspond to

the one used in Statisticka rocenka: &3SR 1968 l125]J cf., foot­

note 41 •

44 Statisticka rocenka: SsSR 1968 [1253 » PP» 146-147, Cf., Chyba

[32: , p. 102, on "spolecenske spotrebnf fondy" (social consunp-

tion funds),

45 Holesovsky, et, al,, [71; , p. 167,

46 Ibid., p, 168,

47 Cap and Dubsky [28], p. 31, Further, they define fixed as­

sets as "the value of projects, building and contracting work,

machines, equipment, tools, inclusive of assembly costs",

48 Chyba [32| , p. 12; see also footnote 36,

49 For an introductory selection of the literature to specific

problems in the use of socialist (i.e., Soviet) data, see Wove

LlOjJ and Colin, Feshback and Uove |_33j and references therein.

From these two papers it can be seen that unless one makes the

operational decision to accept available socialist data, a

Pandora's box of unendinq problems can arise with the infinite

variety of superficially defensible ad_ hoc adjustments to ex­ isting datat

50 In a discussion with the co-author of the University of Penn­

sylvania's Soviet econometric model [. 931, Dr, Herbert Levine, trie existence of Soviet-cons true ted U.S. econometric model was

mentioned. The Soviet econometricions would like to construct

a connanion model for the Soviet Union but they cannot because

much of the required data are considered as classified by var­

ious branches. It is ironic that problems of availability of

their own data hamper Soviet econometricians almost as much as

their western counterparts.

51 Unless otherwise specified, both the statistical and conceptual

definition is meant by the single work "definition".

52 Hove [106], Chapter 10, defines many of the most important

socialist economic concepts, in terms used by western econo­

mists. Horwitz {_73J explaines in depth the Soviet system of

national accounts. Chyba* s dictionary |_32] provides Czech in­

terpretations of various economic and Marxian concepts.

53 Cohn, Feshbach and Nove |_33])» P* 319*

54 For example, see Gregory and Stuart j_60j # pp. 154-155* 546-552,

who discussed the role of profits and the various reforms in

which profits played a key role.

55 Cohn, Feshbach and Move L53^» p. 506,

56 See Horwitz 1_75l* and Bomstein [_19] , or Bomstein's summary in

the Review of Economics and Statistics. November 1962, pp.

446-457.

57 Cohn, Feshback and Hove [_33l* P- 315* These problems are dis­

cussed in greater detail on pp. 305-506.

58 The comments in this section are intended simply to acknowledge

the possibility of serious problems in the quality of official estimc tes. The na ture of mi oh probl er,is is much :::ore crude than

the type of measurement or computational problems which concern,

say, Mormonstern j_10l!or Rhodes The outright falsifica­

tion and dishonesty of which "Communist" data were accused

during the "Cold War" in the 1950*s raises far more basic ques­

tions than the refined issues involved in computer accuracy and

round-off error discussed by Rhodes. While political bias may

indeed be a problem, since the 1960's much of Czechoslovak data

have either been revised or has withstood the criticism and

scrutiny of western economists. As an example, Goldmann and

Ilachtigal [57]» P* 159» expressed, somewhat sarcastically, their

"congratulation to (_Alton, et. al.t |_6]]on their achievement

in estimating the 1955 national income (pp. 74» 75) at 155

billion Kc3, while official information released last year

(1964) put it at 155.7 bilHon KSs . .

59 Cohn, Feshbach and Nove [_55] » P* 322.

60 Hove, L105] t p. 18.

61 Ho empirical measure of the "degree of availability" is implied

here. Generally, it a series could not be found inthe compre­

hensive Statisticka rofienka: CSSR L^5] and [125] or in sources

commonly available to U.S. researchers, e.g., U.H. statistical

materials or publications of the Joint Economic Committee of

Congress, it was considered "elusive" or "hard to find". It

should be noted that a limited amount of data has appeared in

specialized handbooks and Journal articles (for example, see

data sources 10, 11, 14» 15). However, by and large, the statistical coverage (both tine period and definition) of these sources were not satisfactory.

This was orovided by Hr. George J. Demko, Ohio State University; see data source 11 in Appendix B.

In those cases where enough overlap, e.g., more than 5 periods, in the two series was provided, the regression method discussed in the next section (The Problem of Kissing Observations) was used. For example, see "old definition11 versus "new definition" capital stock in Appendices A and C.

Some of the series, e.g., old definition capital stock and old definition investment, requiring this splicing procedure were not used directly in the C£M but as related series to estimate other missing data (as described in the next section). In doing so, the effect of price changes from different base years was included with dummy variables (see the notes to Appendix C).

Other na^or series which were constructed with this technique were the constant Kcs. nonproductive consumption series, all categories, and the constant Kcs. national income series, all industries.

The problem of missing observations, of course, is not unique to Czechoslovak or socialist data. Most empirical studies are hampered to some degree by holes in the required data.

Afifi and Elashoff [_5] review the pre-1966 literature. Hartley and Kocking J_66] have a slightly more current review. Some of the most recent work on missing and incomplete observations has been done by Dagenais L36[] (using a GLS approach); Doran [41] (creating a series to be used in estimating missing data; see

his article :’or 'mother brief liter atTire review); Mehta and

Swamy [97' (dealin-; with missing observations in a Bayesian

framework).

6 7 The OLS regression method of related series is in comnon use for

generating observations. For examolo, the Center for Business

and Economic Research at the Ohio State University has used

monthly U.S. personal income to interpolate monthly Ohio per­

sonal income between annual estimates. As monthly values of

U.S. personal income are released by the Regional Economic

Measurement Division of the Department of Commerce, Ohio per­

sonal income is extrapolated and published in the Center's

Bulletin, e.g., L?9]« Another example is the Department of

Commerce*s Current Population Report scries which provides

annual up-dates of the decennial census population estimates.

The Ohio report [1371 includes the specification of the regres­

sion equation and coefficient estimates.

68 Chow and Lin L50j» p. 372, footnote 2.

69 Ibid., pp. 572-274. Dote that for the C Z D 3 problems involving

irregularly spaced data, the dot subscript identifies the ser­

ies with missing data; without the dot, the series has no mis­

sing observations. Also note that Chow and Lin's equation

numbers are used in this chanter to identify selected equations.

70 Cf,, discussion in Chapter III on the inclusion of lagged en-

domenecus variables.

71 If first-order autocorrelation is assumed, some average of the available residuals '.Je i ~ht 2d hyp ( or none polynomial inp) is used to estimate missing residuals. This may be verified from

Chow and Lin's work.

If observations are missing, some available observations are lost because the data must be transformed iteratively, using periods t and t—1. A preliminary estimate of the first-order serial correlation coefficient,p , is used to transform all observations: x ^ . - p x ^ . If is missing (e.g., if the available sample is 1950, 1955* 1965-1975* then observations for 1950, 1955 an(i 1965 have no corresponding x^ ^), then the corresponding x^ observations must be omitted and its information ignored.

Because the standard Dubin-Vat son test for autocorrelation is defined only for data measured at regularly spaced intorvals, its meaning for an equation estimated with irregular time series data is at best unclear, at worst nonsensical. Therefore, with­ out an appropriate standardized test, a simple operational test of no vs first-order autocorrelation was devised and performed for many series. Briefly, the test involved estimating the re­ lationship between comparable portions of the related series and the incomplete series assuming no and first-order auto­ correlation, then comparing the estimated coefficients and errors of each.

Although the interpolation problem involved irregularly spaced data, most series had some group of contiguous observa­ tions which satisfied the COHC requirements. Thi3 subset of 97

observations ’./ill be designated no the abbreviated sarncle; e.g.,

if the available sample is 1950, 1955-1975, then 1955-1975

is the abbreviated sample. Data generating equations were es­

timated with both 0L3 (for no autocorrelation) and COdC (for

first-order autocorrelation) regression procedures for the ab­

breviated sample. The regression coefficients were compared for 2 substantial shifts; R and standard error (of coefficients and

the regression) values were compared.

The following general conclusions were drawn:

1. No large shifts in coefficients were found. Constant

terms showed the greatest instability.

2. The SEIi (standard error of the regression; see foot-

note 75) and r of CO 1C equation estimates were not

uniformly superior to the OLS equation estimates.

Where COEC equations performed better than 0L3 equa­

tions, the differences was only marginal. In m a n y

cases the differences were reduced to an insignificant

level by respecification to include institutional

factors such as price base changes. Thus first—.

order autocorrelation was not judged to be superior

to the assumption of no autocorrelation.

74 This is easily demonstrated:

Given the model z = x£+ a where X = Lx-i» . . x ~], a matrix of n indc-oendent “ J- —H ’ variables. If some independent variable, say x^, has Let T = number of observations

K = number of independent variables

y = estimated value of the dependent variable w y^ = actual value of the dependent variable

et " yt " *t Then I T e.

T - K Note that the SER is a simole transformation of the root mean

squared error (RJ'SE): » 2 et------, HH52 = I 1 = j T - K SER F - K V T By choosing that equation estimate with smaller SJH, the HKSE

and mean squared error is also smaller.

Derivations and transformations for all series are available

from the author on request. CHAPTER III

THE CZECHOSLOVAK ECONOMETRIC MODEL

Introduction

In this chapter the final specifications and parameter estimates of the equations in the Czechoslovak Econoti*etric Model (CLH) are presen­ ted* A brief overview of the CEM is followed by a discussion of the identification of the equations and the appropriate estimator for each.

Then, the specification of each equation is explained and the more im­ portant coefficient estimates are examined, finally, the structural equations are evaluated and selected characteristics of the CEM are com­ pared with those of existing econometric models.

Overview of the CU1

The CEM is an interdependent system of structural equations which depicts major characteristics of the socialist centrally planned economy, including its high degree of dependency on other COMLCOn nations. Thirty- tvo behavioral equations aud ten identities describe the following sec­ tors (tne asterisk is explained below):

Government Investment* Money supply Revenues, expenditures*

Foreign trade Imports* Exports*

National income or net material product (production)* 100

i.riployi..ent*

Labor force* Migration

Personal income

ConsutipLioh

Tne relationships among these sectors* i.e., the dependence of one sec­ tor on another in the CLM* are illustrated in Figure 3.1.

Those sectors asterisked above are further divided by three broad industrial classifications* manufacturing* agriculture and other* Comr* ponents included in each of these are:

Manufacturing Industry Construction

Agriculture Forestry Farming

Other Nonproductive services Transportation Communicat ion electricity* gas* water, sewerage Wholesale* retail trade Government administration Productive services Transportation Cl, mnmn i ca tion Electricity* gas, water, sewerage

Net material product is defined and estimated only for productive branches of the economy. Therefore* the other national income sector includes only those branches listed under the "productive" heading. For all other asterisked sectors both productive and nonproductive branches are included in the other sector. Major exogeneous variables are the rural and urban populations* participation rate of women* a composite GNP for other

COMECON nations* prices* investments in and capital stocks of PERSONAL INCOME

WAGES

DEMOGRAPHY EMPLOYMENT SOCIAL PRIVATE CONSUMPTION CONSUMPTION

MONEY EXPENDITURES SAVINGS

REVENUES

FOREIGN PRODUCTION (NET MATERIAL TRADE PRODUCT)

RETAIL SALES

FIGURE 3.1

RELATIONSHIPS AMONG EQUATION BLOCKS GROUPED BY ECONOMIC SECTOR c 102 manufacturing and agriculture. The causal ordering from the exogeneous variables and among the endogeneous variables is discussed in the next section.

All variables in monetary units, except the COMECON composite

GUI (symbolized as CMLA), are in constant 1967 crowns (k£s»). The

COMECON GNP, excluding that of Czechoslovakia, was expressed in nominal terms, current U.S. dollars. Bata on each of the COMECON nations were estimated consistently in current dollars by the U.S. Arms Control and

Disarmament Agency [136], allowing compilation of the composite GNP.

As discussed in the following section, equation coefficients were estimated by either ordinary least squares (OLS) or two stage least squares (2SLS) from annual time series data for the period 1953-1972,

For the initial estimation and tests of the hypotheses embodied in al­ ternate specifications, the OLS estimator was used. Each equation of — 2 the model was evaluated on the basis of R , the standard error of the regression (SER),^ and the t-test of significance of the coefficients.

For these tests a lower limit of t * 1.70 was used. The maximum number of Independent variables, including the constant, in any equation was

5 which yielded a minimum of 13 degrees of freedom. Thus, at t “ 1*70, the minimum level of significance was slightly greater than 10 percent.

In the final version of the CEM, below, only 6 of the 77 total endogen- eous or exogeneous independent variables (excluding the 32 constant terms) have a value of t less than 2.0. These were included because of their theoretical contribution, their reduction in the SEP and their ad- _2 dition to R . Identification of the Lquations 3 The identification of the equations of the CLK proceeded accord­

ing to the criteria established by Fisher [**7]. The identification of

each equation, of the system, wnether it was under-, just-, or over­

identified, had important implications for the choice of the proper esti­

mator. While the under-identified equation cannot be estimated, the ap­

propriate estimator for a just-identified equation is ordinary least

squares (OLS); for an over-identified equation it is two-stage least 4 squares (2SLS). Therefore, in order to determine the correct estimator

for a particular equation, the identification of that equation first had

to be established,

Fisher developed several alternate statements of the necessary

or order condition for an equation to be identified.'1 One of these is

Corollary 2.4.1a:

"a hecessary (but not sufficient) condition for the identi- fiability of the first equation under exclusion restrictions is that the number of exogeneous variables excluded a priori **»■ from that equation be at least as great as the number of endogeneous variables not so excluded less one.””

In Fisher's notation*1

let m + 1 ** number of endogeneous explanatory variables in the

equation

1 - number of exogeneous explantory variables in the

equation

A " number of exogeneous variables in the system.

If A - JL - m, then the equation is just-identified.

If A - X. > m, then the equation Is over-identified.

The CLl-i fir3t was considered as a single block- of 42 equations with a 104

total of 14 predetermined variables, including the constant terra.^ Ap- U plying Corollary 2.4.la, each equation was found to be over-identified.

Ihe number of endogeneous variables on the right hand side of any equa­

tion (m+1) was at most three, equations (13), (18), (22), (27) and (28)

for tXPti, GliYM, ALF and KOLF, respectively. The minimum number of ex­ cluded exogeneous variables, not including the constant term, was ten for equations (13) and (28), EXPM and M0LF*

However, the above analysis regarding the CEM as a single block, of equations ignored the causal ordering inherent in the model. Discus­ sed by Simon in [120] and L T£sperance in [89] and [91], causality is de­ fined as

"'an asymmetrical relation among certain variables or sub­ sets of variables in a self-contained structurer(120, p. 73]. The self-contained structure, a linear structure in which the number of equations Is equal to the number of variables, can be recursive among subsets of dependent var­ iables and have interdependence within a subset of depen­ dent variables."9

The general relationships among blocks of equations grouped by economic sector is shown in Figure 3.1. The direction of the arrow indicates the causal ordering within a particular sector to other economic sectors.

The relationships illustrated in Figure 3.1 depend on the causal ordering of Individual equations of the CEM which Is shown in Figure

3.2.10 The endogeneous variables In Figure 3.2 were rearranged (from their order by economic sector) and grouped according to the causal re­ lationships so as to indicate their recurslvity or interdependency.^

The direction of causality flows from the variable with the dot to the variable with the arrowhead; i.e., the dotted variable is an indepen­ dent variable in the equation(s) denoted by the arrowhead. For example, 103 Endogeneous Predetermined variables var i ables____

EXPH BUM, T, CMSA EX? A Block I IKPH IHPA < BP <

GN Y?i T, KH g k y a KA GliYO < Block II T GNY - J IT 10 • j . HI, IA MSG DUM TTX DUM, CPIAL TD DUM TP TO H J j GEMA GEO GET h D EM IH, PRWOM EA * EO * * PRWOM ETOT I NUMIG ALF RPOPJ, PRWOM WOLF UPOPJ, PRWOM, T WMG DOM VOG TPI J, TRANS OLY TVB J j CS 1 DUM DPI RETS - DIM

CM Block III CA CPIFD

CO DUM, CPISV PS J SG J UPOPJ, T

FIGURE 3.2 THE CAUSAL ORDERING OF THE CEM 100

GM'ti, net material product iu manufacturing, is an independent variable in the RETS, retail sale3 , equation. Three separate blocks of equations within the CEM were distinguished for which there is a recursive causal relationship from block I to block £1 and from block II to block III.

Within blocks 1 and 11 the equations are Interdependent, block III is a group of equations which exhibit only recursive relationships, either from block II or from the other endogeneous variables in block III* The equations in block III are grouped together for convenience; they could have been considered individually as separate blocks, each containing one equation.'1'12

Further, the structural form of the model was partitioned into blocks according to the causal ordering. The subscripts correspond to block numbers, e.g., block 1 ■ subscript 1 , etc. **11 0 0 V *21 *22 0 *2 + Gz - jj (4-1) U *32 *33 13 where

EXPM 2-2 “ GNYM - CM LXPA GNYA J CA IMPMGNYO CO IMPA GUY PS BP LM IT 1SG LA 10 EO MSG LTOT TTX NUMIG TD ALF TP MOLF TO WWG R WOG GEMA TP I GEO TRANS GET OLY D TWB DPI cs „RET£i, 107

From block I, only IMPM, manufactured imports, flows into block II and from block II Di’I and RETS, disposable personal income and retail sales, flow into block III. Endogeneous variables in block III do not depend directly on any variables from block I. Thus, was a zero matrix.

The block triangularity of B in (4-1) combined with the assump­ tion of the block diagonality of 2 , the variance-covariance matrix, 13 satisfied two of the three conditions for Fisher's Theorem 4.10.1, a sufficient condition for the identification of the equations of a block recursive system. This assumption allows correlation among the distur- 14 bance terms within a block but not between blocks. In order to satisfy the final condition of Theorem 4.10.1, the identification of each equa­ tion had to be determined with respect to its block, rather than the en- 13 tire CEM system. Endogeneous variables contained in higher order blocks (those with a smaller number of subscript) were treated as pre­ determined in lower order blocks (those with a larger number or sub­ script) For example, because block I is of higher order than block

II, IMPM could be considered predetermined when establishing the identi­ fication of equations in block II. Similar reasoning applies to the predetermined status of DPI and RETS In block III implying that each en­ dogeneous variable in block III was a function of only predetermined variables. Thus, by either the order or rank condition, all equations of block III were found to be just—identified1** and therefore were esti­ mated by OLS.

The identification of block I was established by the use of the sufficient rank condition.17 The balance of payments (BP) identity, equation (17), was substituted in each of the other equations of block 108

I and the rank, criterion applied. The EXPM equation, (13), was found 18 to be ju3t-identified. Iherefore, the EXPM equation was estimated by

OLS and the others by 2SLS.

The identification of the remaining block, II, was established

1 0 by use of the generalized order condition, Fisher's Corollary 4,6.1. because the number of endogeneous and exogeneous variables in block II was large compared with the small number of each in individual equations, the order condition was Judged to be adequate as an identification pro­ cedure.^ From the application of the order condition, it was concluded that all of the equations in block II were over-identified. Thus, the

2SLS estimator was used for each of the equations in block II.

The Equations

A summary of the 42 CfcM equations, discussed below, is contained in Appendix D, Including the definitions, units of measure and the data location in the CLD1* for all variables. In the following discussion the equations are grouped into blocks on the basis of the economic sectors —2 shown in Figure 3.1. The R , SLR and the Durbin-Watson test statistic

(Dn) for serial correlation are presented for each equation estimated by GLb. Tor those equations estimated by 2SLS, OLS estimates are also — 2 provided for comparison with other equations, e.g., of the R statistics, finally, the standard error of each estimate is found in parentheses below the estimate.

Government

Government, for the purposes of this model, subsumes the entire bureaucratic structure including planners, policymakers and administra­ tors at all levels— national, republic and local. The government plays 109 a iMy role because investment, price, monetary and fiscal policies and priorities ori Sin ate in this sector and are implemented throughout the economy. Thus a block of equations was formulated to describe each major role of the government. Tue following discussion examines these roles in turn.

Iotal investment (IT) depends foremost on the supply of funds and materials available wiiicn can be directed or redirected by the cen­ tral planners. In the centrally planned economy of Czechoslovakia, total national income or revenue, uarodnl duchod, (GUY) comprises the major 21 potential source of investment funds. The negative constant term in

(1) OLS IT « -15.274 + .374 GNY (1.815) (.009)

R2 - .9897 SER = 2.233 DW = 1.23&

2SL5 IT - -15.336 + .374 GNY (1.816) (.009)

(1) implies that the marginal propensity to invest out of national in­ come is greater than the average propensity. This indicates that as CITY has increased, a greater percentage of it has been invested. The his— IT torical data (in the CEDB) verify this conclusion: e.g., in 1953 was 40.8 percent; in 1972 it was 44.7 percent. Investment priorities are decided politically, presumably on the basis of a socialist welfare function, so that the level of investment in manufacturing (IM) and in agriculture (IA) are exogeneous. The remainder of investment In all other sectors (10) is determined endogeneously.

(2) 10 - IT - IM - 1A

A second major role of the government is to set prices for all intermediate and final goods and services. In this model, cost of living 110

indices serve as proxies for the aggregate price level of all consumer

goods (CVIAL), consumer foodstuffs (CPIFD) and consumer services (CPISV).

Also, although not appearing specifically In any equation, implicit

national income deflators (total, manufacturing, agriculture and other)

were used to transform current K£s. data to constant K£s, It is assumed

that price proxies reflect, ex post, the pricing decisions of the plan­

ners.

As any other national government, the Czechoslovak government

controls bank policies for money and credit. Historically, the primary

role of money and credit in a socialist economy has been to facilitate 22 the achievement of planned targets. Western—type countercyclical

credit-monetary policy Is unknown in socialist economies. Generally,

central planners have supplied the demand for credit as required by the 23 plans. On the other hand, planners have desired to maintain tighter

control over the money supply in order to restrict the liquidity of con­

sumers. Also, to this end, individuals are not permitted to maintain 24 demand (checking) accounts. Thus, the only component of the money

supply in this model is currency in circulation (MSG). Currency is used

primarily to cover the total wage bill (TWB) and balancing the government 25 budget, eliminating the surplus or deficit (1>). The positive coeffi-

(3) OLS MSG - -7.563 + .144 TWB + .047 D + 2.539 DUM (.960) (.009) (.015) (.499)

R2 - .9823 SER - .568 EW - 1.868

2SLS HSU - -7.680 + .1457 TWB + .052 D + 2.427 DUM (.980) (.009) (.016) (.524)

cient for DU11 indicates that higher levels of currency in circulation were necessitated by higher post-reform prices for retail goods. Ill

Unlike monetary policy which is essentially passive, the state

pursues, through the mechanism of central planning, an extensive, de­

tailed and active fiscal policy* The total amount of funds the govern­

ment has to distribute is determined by state revenues in the form of

turnover, direct (wage or income) and other taxes as well as profit taxes

returned from the socialist sector. The turnover tax for a single unit

sale on a consumer good is defined as the difference between the con­

sumer's price and the factory supply (wholesale) price. The level of

turnover tax revenue (TTX) then depends on this per unit difference and

the volume of retail sales (RETS), however, because no complete series

for the wholesale price level was available (or could be reconstructed with the method discussed in Chapter II), only the price level for all

consumer goods (CPIAL) was included. Also, the dummy variable DUM was

introduced to capture the effect of the 1967 reform of the price struc­

ture which increased wholesale prices and decreased TTX. Income taxes

(4) OLS TTX - 49.333 + .258 RETS - .204 CPIAL - 23.165 DUM (8.629) (.022) (,06b) (1.494)

R2 - .9690 SER - 1.230 DW - 2.723

2SLS TTX - 48.371 + .261 RETS - .197 CPIAL - 23.347 DUM (8.674) (.023) (.068) (1.503)

comprise the major direct tax (TD) and therefore depend on total personal

income (TPI). DUM was included to account for the effect of the 1967 26 price reforms and the revision of the income tax structure. Enterprise

(5) OLS TD - -3.376 + .098 TPI + 3.428 DUM (.907) (.006) (.479)

K2 - .9775 SER - .748 DW - 1.576

2SLS TD “ -3.464 + .098 TPI + 3.397 DUM (.912) (.006) (.480) 112

profits vary with the level of total production and centrally established wholesale prices. However, as mentioned above, sufficient aggregate

wholesale price data were unavailable; profit data are similarly unavail­

able. Thus, the level of profit taxes (TP), defined for the purposes

of the CLM as payments from the socialist sector less TTX, depends solely 27 on the level of production (GNY). All other taxes and payments to the

(6) OLS TP - -29.773 + .479 GNY (6.861) (.033)

R2 - .9166 SER - 8.443 DW - 1.235

25LS TP « - 29.806 + .480 CSY (6.865) (.033)

government (TO) depend on the level of economic activity for which GNY

is a proxy. Total revenue (R) available to planners for distribution

(7) OLS TO « - 2,727 + .047 GNY (1.007) (.005)

R2 - .8295 SER - 1.240 DW - 1.265

2SLS TO - - 2.723 + .047 GNY (1.008) (.005)

according to their priorities is then:

(8) R - TTX + TD + TP + TO

The primary function of the expenditure side of the state budget

has been to redistribute sectoral and regional resources into socialist-

ically desirable channels. By means of expenditures central planners

have had substantial impact on all sectors of the econony; in the mid-

1960*s government expenditures equalled three-fourths of the national

income.With selective expenditures on goods and services, planners

have attempted to increase socialist accumulation, primarily investment,29 113

Government expenditures on manufactured and agricultural goods (GEMA),

i.e., those in the national economy plus those for defense and safety

but excluding wage funds, have been balanced by planners with the avail­

able total revenue, R. balance has also been achieved with credit man­

ipulation or the money supply (MSG; see footnote 23). Other government

*R2 » .8854 SER - 4.612 DW - 1.466

2SLS GE1IA - 8.208 - 3.177 MSG + .687 R (5.484) (.928) (.107)

expenditures (GEO) are those for social and cultural services, admini­

stration, courts and procurators and the wage fund of the state budget

and national committees. Other investment (10) funds purchase goods which

complement expenditures on such services and also Indicate the priority

planners place on the other sector. The wage fund portion of GEO is de­

termined by the same economic components which determine the total wage

bill (TWb). As with GLMA, GEO are financed in part by the money supply.

(10) OLS GEO - -89.269 + 1.476 10 + 1.567 I V ® - 6,507 MSG (10.477) (.451) (.147) (1.619)

R2 - .9672 SER = 4.378 DW - 1.680

2SLS GEO - -94.167 + 1.807 10 + 1,645 TV® - 7.770 MSG (11.250) (.500) (.160) (1.820)

*• Total government expenditure (GET) is simply the sum of (9) and (10):

(11) GLT - GEMA + GEO

The government surplus or deficit (D) is then total revenue less total

expenditure:

(12) D - R - GET 114 t o reign Trade

Like other small national economies, Czechoslovakia is highly dependent on foreign trade for imports of intermediate inputs and final goods and for export markets. In acknowledgement of this dependency or openness, socialist planners have pursued a policy of bilateralism in order to minimize the disruptive effect of unexpected balance of pay- 30 merits problems on the econociy and plan fulfillment. There have been other Important reasons for the prevalence of bilateral trading agree­ ments. Because of the low level of foreign exchange reserves maintained by Czechoslovakia and the lack of convertability of Czechoslovak cur­ rency, especially with respect to western currencies, planners have been required to trade bilaterally* Moreover, such agreements have gone hand in hand with the efforts of the Soviet Union to gain and maintain control 31 over the Czechoslovak economy as one member of a cohesive economic block.

In addition to bilateral agreements, planners have attempted to balance exports and imports of specific commodity groups or at least to keep the export-import difference to an acceptably low level. This policy, so called "structural bilateralism," has resulted in the simultaneous de­ termination of exports, imports and the balance of payments (BP, an identity below). Van Brabant [138], has identified four major groups of commodities which are traded bilaterally: 1. industrial mechanical equipment; 2. Intermediate goods for industrial purposes; 3* foodstuffs; 32 4. industrial consumer goods.

In the CEM the rather broad category of manufacturing includes categories 1, 4 and those intermediate goods in 2 which are semi­ manufactured goods (i.e., have been processed to some degree by the 115

manufacturing sector). Sales of manufacturing exports (LXPM) of non-

agricultural fuel and raw materials* machinery* equipment and non-food

consumer goods* depend heavily on foreign demand* especially from other

COMLCGN economies. A proxy for this demand is the aggregate gross na­

tional product (CMEA) of the other COMECON nations:'*'* Bulgaria, the o / German Democratic Republic* Hungary* Poland* Romania and the U.S.S.R.

Also* a time trend (T ■ 1*...* 20 for 1953-1972) for the entire period

is included as well as a dummy variable to capture the effect of the 1967

reform of prices and the foreign trade corporations. (DOM “ 1 for 1967- 35 1972* zero otherwise.) The agricultural sector of the CEM encompasses

(13) OLS EXPM * 1.912 + .017 CMEA + .459 BP - 4.345 DUM + .764 T (.644) (.005) (.207) (.686) (.147)

R2 « .9922 SER - .602 DW - 1.483

van Brabant's category 3 and the remainder of 2* those intermediate goods

processed strictly by the agricultural sector. Because of the structural bilateralism* exports of agricultural raw materials* livestock and food­

stuffs (EXPA) are Interdependent with agricultural imports (IMPA) and BF.

Also* in. part* the actual level of BP reflects the planners' success (or

failure) to meet the desired overall level of balance between exports

and importsAgain* the possibilities for importing manufactured goods

(14) OLS EXP A - - .421 + .394 IMPA + .084 BP (.558) (.091) (.028)

R2 - .4834 SER - .134 DW - 2.473

2SLS LXPA * - .814 + .458 IMPA + .080 BP (.777) (.126) (.034)

(IMTM) have depended heavily on funds made available by manufactured 116 exports. Increases In EXPM, either capital goods or consumer goods, have been required to pay for goods (especially those with advanced 37 technology) imported to assist in rapid economic development* Siini-

(15) OLS IMPM * -A.276 + 1.008 EXPM - .859 BP (.242) (.015) (.082)

R2 “ .9982 SER - .254 DW - 2.123

2SLS IMPM • -4.392 + 1.016 EXPM - .908 BP (.294) (.019) (.108) larly, imports of agricultural goods (IMPA) have depended crucially on the structural bilateral balance, as Indicated by EXPA (the specific com- 38 modifies) and BP (the balance). The balance of payments on the current

(16) OLS IMPA - 3.473 + 1.337 EXPA - .186 BP (.618) (.307) (.045)

R2 » .6050 SER - .248 DU - 2.137

2SLS IMPA « 3.695 + 1.227 EXPA - .173 BP (.751) (.374) (.040)

39 account (i»P) follows directly:

(17) BP - EXPM + EXPA - IMPM - IMPA

National Income or Net Material Product (Production)

Although not called "net material product," the concepts of na­

tional income (n£rodnf d&chod) and net material product are identically

defined and will be used interchangeably. National income is defined ast

"... the sum of values newly created in the course of one year. ... Materially it equals the aggregate value of all consumer goods production (raw materials and means of pro­ duction) produced which in the course of the year exceed the consultation of means of production. — Only the pro­ duction of material goods and material services (e.g., freight transport, repairs, etc.) are Included in the national income, health services, educational services and state administrative etc. are not Included in the national income thus defined. 117

The equations in the production sector have been specified as linear, not log-linear as are many production functions. In order to manipulate the simultaneous system of structural equations into the re­ duced form with standard matrix algebra, no non-linear identities are permitted. For example, the logarithm of the level of net material prod­ uct in manufacturing would be required, e.g., for a log-linear production function whereas simply the level is required in the retail sales equa­ tion, (39), The linear restriction is most binding here because it does 4; not allow the use of the wealth of information available on Cobb-Douglas or CBS production functions. Therefore, the structural equations for national income below must be interpreted more broadly than production functions in the usual neoclassical sense.

National income from manufacturing (GNYM) depends foremost on the factors of production: employment in manufacturing (EM) and the man­ ufacturing capital stock (KM). To account for the influence of foreign trade on input supplies, imports of manufactured goods and raw materials 42 in the form of semi-manufactured goods (IMPM) are included* Because

IMPM depends directly on EXFM, GNYM is influenced Indirectly by EXPM*

(18) OLS GNYM - -327.000 + .124 EM + .537 KM - 2.146 IMPM - 7.462 T (95.342) (.035) (.117) (1.187) (3.524)

R2 - .9899 SER - 4.723 DW - .834

2SLS GNYM - -336.353 + .127 EM + .546 KM - 2.230 IMPM - 7.744 T (100.718) (.037) (.121) (1.268) (3.686)

The negative coefficient of T is consistent with the decline in the long run growth rate of manufacturing output in Czechoslovakia. Also, the negative coefficient of IMPM indicates that import substitution has oc­ curred for intermediate and final manufactured goods. US

National income originating in agriculture is determined In part

by the agricultural capital stock (KA). Both employment in agriculture

and the agricultural labor force (ALF) were tested as measures of the

labor input to agriculture. Agricultural labor force was more signifi-

cant and resulted In slightly more explanatory power (higher R , lower

SER) than employment. Family members and housewives who occasionally

assist in agricultural labor are included in the former but not the lat­

ter. On farms these groups are an additional source of labor power for,

e.g., seasonal peak demand, and also play an important role in the output

of private plots.

(19) OLS GNYA - -23.599 + .020 ALF + .173 KA (12.192) (.005) (.047)

R2 - .4789 SER - 2.071 DW - 1.616

2SLS GNYA - -25.517 + .021 ALF + .160 KA (12.433) (.005) (.048)

National income from all other sectors (GNYO) Includes those

productive services which are complimentary to manufacturing output, for

example transportation and communications. As the manufacturing sector,

GNYM, has grown, so has the demand for complementary services from the

other sector. Moreover, the manufacturing sector supplies the capital

goods required as inputs, e.g., transportation equipment, by the other

sector.^

(20) OLS GNYO - -13.109 + .431 GNYM - 1.445 T (4.012) (.068) (.537)

R2 - .9742 SER - 1.926 UN = 1,331

2SLS GNYO - -13.051 + .430 GNYM - 1.437 T (4.060) (.068) (.543) 119

Total national income or net material product (GNY) is simply the sum of the national income originating in each sector.

(21) GNY - GNYM + GNYA + GNYO

Employment

The employment equations in this model are entirely supply ori­ ented. This is in keeping with socialist policies which have promoted full employment. The socialist propensity for employment of all able- bodied persons has resulted historically in a chronic shortage of labor in Czechoslovakia, as discussed in Chapter 11. Also, to a limited ex­ tent, under-employment has been institutionalized as employment security having been preferred to unemployment compensation and other dole pro­ grams. Thus changes in employment have resulted primarily from changes in the supply of laborers.

Employment in manufacturing (EM), including cooperative members and self-employed persons, depends on the nonagricultural labor force

(MOLF) for the overall pool of available labor. Net migration to or net arrivals in urban areas (NUM1G) represents the potential addition to

MOLF and EM. Moreover, the level of investment in manufacturing (1M) indicates the central planners1 priorities favoring manufacturing by the supply of additional funds. Finally, the proportion of employed women of the population of working ages, ages 15 to 64 (PRWOM) was included as an exogeneous measure of the degree of participation of women. The (2 2) OLS EM - 1005.26 + .520 MOLF + 6.34S IM - 29.£39 PRWOM (80.212)(,034) (1.826) (4.831)

+ .574 NUMIC (.164)

R2 - .9936 SER - 13.648 DV - 1.812 120

2SLS LM - 1003.07 + .516 MOLF + 6.271 IM - 29.215 FRWOM (S9.3S7) (.035) (1.875) (A.922)

+ .672 ilUMIC (.190) negative coefficient for PRVJOM reflects the shift in Czechoslovakia of women from manufacturing jobs, requiring more labor effort, to service-

related jobs, requiring less. While women's participation overall in nonagricultural branches of the Czechoslovak economy has increased since the 1950*5, the proportion of women in industry lias decreased.^

Employment In agriculture (EA) depends directly on those avail­ able workers in the agricultural labor force (ALF) and inversely on the drain of potential laborers who migrate to urban areas (NLMIG) for man­ ufacturing jobs.

(23) OLS EA - -73.660 + .995 ALF - .484 NUMIG (39.610) (.020) (.187)

R2 - .5968 SER - 16.691 DW - 1.649

2SLli EA - -98.927 + 1.006 ALF - .353 NUHIG (43.690) (.021) (.213)

Similar supply constraints of the nonagricultural labor force, urban migration and the participation rate of women determine other em­ ployment (El). The sign of the coefficient for PRW0M is consistent with

(24) OLS EO » - 1730.34 + .371 MOLF - 1.197 M jMIG + 60.375 FRWOM (103.711)(.024) (.230) (6.440)

R2 = .9970 SER - 19.411 DW - 1.928

2SLS EO - -1735.51 + .384 MOLF - 1.448 EOMIG + 58.768 FRWOM (107,642)(,02b) (.271) (6.728) it3 sign in (22), manufacturing employment. The trend of increasing women's participation in services is evident with the positive coefficient 121 from FRWOM iu (24) and the Increase in £0 over the estimation period.

Comparing the opposite signs for NUMIG In (22) and (24) , It can be con­ cluded that migrants to urban areas are employed In manufacturing rather than services. This conclusion Is supported by the stronger relation­ ship between NUMIG and manufacturing wages than between NUMIG and other wages. The former specification has been used in this model and is dis­ cussed below In the demographic sector.

Total employment (ETOT) is identically the sum of each sector's employment.

(25) ETOT - EM + EA + E0

Demography

In order to explain the available labor supply endogeneously a small demographic sector is Included in the Czechoslovak model. Total population at mid-year Is divided into rural population (KFOPJ) and urban population (UPOPJ), both at July 1. The two major determinants of pop­ ulation level are births and deaths. While the latter is relatively stable, the former is an extremely complex concept to model in an econ­ omic framework. For instance, the lags between many economic events and changes in fertility must be precisely determined. Therefore, the entire question of an appropriate economic-econometric explanation of fertility has been side-stepped by defining both RPOPJ and UFOPJ as exogeneous.

Net urban migration (NUMIG) is explained endogeneously and captures some of the high degree of mobility^"* of the Czech population. It is defined as net arrivals in urban areas, i.e., gross arrivals in urban areas less gross departures. Arrivals and departures are of those persons actually changing their residence. The basic reason for using net rather than 122

gross migration was co obtain a measure of the potential addition to the

nonagricultural labor force. The largest pool of laborers not already

in the nonagricultural labor force because of tneir location are those

in rural areas with agricultural jobs. Presumably gross arrivals and

departures includes those migrants from urban to urban areas who are al­

ready part of the nonagricultural labor force. By using net migration,

these workers are excluded.

To account for the attraction of manufacturing employment of 47 rural inhabitants, NUMIG depends on the real average annual manufacture 48 ing wage (WtlG); In order to test the hypothesis that manufacturing

(26) CLS NUMIG - -68.826 + 6.226 WMG (20.387) (1.076)

R2 » .6308 SER » 18.002 DW - 1.344

2SLS NUMIG ■= -72.091 + 6.402 WIG (20.464) (1.081)

49 rather than other wages (WOG) attracted urban migrants, (26) was re- estimated, replacing WMG with WOG. The resulting equation estimated by 2 OLS had an R - .3633 and the SLR was 23.6, Contrasting these with equa­

tion (26) (K2 - .6308, SLR ■ 18.0), it can be seen that WMG has a strong

relationship with NLMIG than does WOG. In another test, both WMG and

WOG were Included as explanatory variables. The coefficient of WOG was —2 not significant at the five percent level; for this OLS equation R ■

.6290 (SER “ 18.0). These results support the signs of NUMIG in the EM and EO equations, (22) and (24) respectively, and the conclusions that urban migrants are employed in manufacturing rather than services.

For this model the economically active population approximates the labor force. This proxy for the labor force 123 -

M..*includes the armed and security forces, home workers, the self-employed, employed prisoners, and probably per­ sons employed in confidential categories and frictional unemployment, all of whom are usually excluded from re­ ported annual employment figures.’

Apprentices are also included. The agricultural sector is primarily lo­ cated in rural areas. Therefore, the rural population (RPOPJ) has a substantial influence on the availability of laborers for the agricul­ tural labor force (ALF). Two other labor supply related determinants are NUMIG and PRWOM. Traditionally, women's participation has been higher in agriculture where domestic responsibilities often can be fulfilled simultaneously with farm tasks. Finally, the ALF and nonagricultural labor force (MOLF) are determined simultaneously from a limited total population. The negative coefficient for RPOPJ and the positive coef-

(27) OLS ALF - 7133.03 - .638 RPOPJ + 1.279 iUMIG + 101.363 FRWOM (1855.64) (.233) (.497) (11.870;

- 1.014 HOLF (.103)

R2 - .9845 SLR = 35.286 DW - 1.733

2SLS ALF - 7919.55 - .736 RFOPJ + 1.728 NUMIG + 102.152 FRWOM (2035.50) (.256) (.616) (12.224)

- 1.069 MOLF (.116) ficient for NUMIG clearly indicate the existence of disguised unemploy­ ment or underemployment in agriculture. If Inhabitants move to urban areas, RPOPJ will decrease, NUMIG will Increase, resulting in more effi­ cient use of tnose farmers left in rural areas. With the decline in un­ deremployment, more people will be encouraged to enter the ALF.

Tiie nonagricultural labor force (MOLF) is specified similarly.

The major industrial complexes are located in urban areas; thus MOLF 124

draws primarily from the urban population (UFOPJ). The participation of

women has become increasingly important in services as previously dis­

cussed. The time trend, T, is also included.

(26) OLS MOLF - 2239.57 + .157 UPOPJ + 55.804 PRWOM - .478 ALF <815.679)(.080) . (16.068) (.096)

+ 50.755 T (16.823)

R2 - .9989 SER - 22.800 DW - 1.592

2SLS MOLF - 2260.59 + .156 UPOPJ + 54.290 PRWOM - .465 ALF (818.452)(.030) (16.672) (.104)

+ 52.022 T (17.235)

Personal Income and Wages

Existing regional models suggest several different specifications

for wage equations. Glickman, in the Philadelphia models [51], [52],

[53], emphasizes the interregional competition of employers for labor.

Regional money wage is made a function of national money wage for that

sector. However, again because of national policy limiting migration of

Czechoslovak labor out of the country to a negligible amount, this ap~ proach is not directly operational. Another approach suggested by Crow

for the Buffalo model [35] is more appropriate for describing the social­

ist Czechoslovak economy. The average annual wage for each sector de­

pends on the sector's average productivity of labor. In Soviet-type econ­ omies such as Czechoslovakia, average cost pricing is used extensively

and average product, the ratio of output to employment, is closely re­

lated to average cost.

Use of average product, a multiplicative relationship between output and the inverse of employment, must be modified for use in a 123

linear system, both output and employment have been Introduced as de­

terminants of wages. From the average product ratio, a direct relation­

ship would be expected between wages and output and an inverse one be­

tween wages and employment. On the other hand a supply dominated labor market, such as Czechoslovakia's requires an increase in wages to obtain

any additional employment. This indicates a direct relationship between employment and wages. The estimated equation for average annual real wage In manufacturing (WMG) illustrates the direct relationship. The

(29) OLS WMG - -17.532 + .013 EM - 2.685 Db’M (1.709) (.001) (.483)

R2 - .9705 SER - .659 LW - 1.191

2SLS WMG - -17.674 + .013 LM - 2.715 DUM (1.711) (.001) (.483) primary determinant of the WMG is the employment level in manufacturing 51 (LM) . The dummy for 1967-1972 Includes the significant effect on wages of the change in relative prices instituted in 1967.

ho data on a single composite wage for the other sector was avail­ able. The average annual real wage in the socialist sector (WOG) of the economy is a composite wage which Includes, among others, productive ser­ vices. The major branch In the other sector is services. It is assumed

that, in the aggregate, wage competition results in equivalent wages be­

tween the other sector and the socialist sector. Thus, WOG is a reason­ able proxy for other wages. The use of WOG leads to results similar to thoseexpected for the average product of labor specification. Moreover,

(30) OLS WOG - 26.737 + .410 GUYQ - .026 EO + 1.754 WMG (4.571) (.124) (.005) (.254)

R2 - .7953 SER - 1.876 DW - 2.271 126

2SLS WOG « 26.280 + .393 CIJYO - .026 EO + 1.814 WMG (4.677) (.128) (.005) (.259)

tne illative coefficient for LO reflects Increased participation by wo- i en and unskilled laborers in the other sector. They are not paid as veil as those in sectors with Material production. The inclusion of WMG

captures the substitutability of Manufacturing and other workers. Tor example, if the WMG rises to induce more workers to choose manufacturing jobs, those workers must be drawn from the other sector (at least in the short run). The competition for and drain on the supply of workers from

the other sector drives the WOG upward. The positive coefficient for

WMG reflects this direct relationship.

The total wage bill constitutes the major component of total personal incone (TPI). The other major component of Til in non-socialist economies is property-type income. However, in Czechoslovakia where the state owns most of the productive means, this component is negligible and is thus excluded.*** The total wage b i l l ^ is, by definition, the sum of the products of each sector*s average annual wage and the average annual employment. Because of the multiplicative relationships between employment and wages, the total wage bill is included as a linear iden­

tity below (34). For TI’I, the major components of TVJi, total employment

(Ll'OT) and wages, are the explanatory variables.

(31) OLS TP I - -269.409 + .052 ETOT + 2.643 WMG + 2.667 W0C (28.724) (.006) (.833) (.401)

E2 - .9892 SER - 3.991 DW - .9791

2SLS TPI - -273.598 + .052 ETOT + 2.533 WMG + 2.757 WOG (33.484) (.007) (.999) (.499) 1/7

Transfer payments (TRANS) and other miscellaneous income (OLY) are the two remaining components of Tl'I. Social and health insurance payments comprise TRANS which depends on the level of government funding of sucu programs. Governr..ent expenditures on items other than goods

(GEO) supply funds for 1RANS. Also, communal or social consumption (CS), in part, has been a substitute for TRANS. As communal services have in-

(3?-) OLS TRANS - -1.837 + .*65 GEO - .124 CS (.887) (.022) (.047)

R2 = .9871 SER - 1.144 DW *■ 1.771

2SLS TRANS - -1.912 + .478 GEO - .148 CS (.899) (.024) (.049) creased, e.g., health care, the need for insurance payments, e.g., for health problems, has decreased. finally, OLY, including agricultural sales from private plots, loans, interest on savings and other miscel­ laneous income, depends on the general level of economic activity as measured by uatlonal income (GNY).

(33) OLS OLY - -7.163 + .102 GtiY (1.671) (.008)

R2 - .8924 SER - 2.057 EW » .944

2SLS OLY => -7.189 + .102 GNY (1.672) (.008)

Because TPX, TRANS and OLY are determined endogeneously, the total wage bill (ILL) is expressed by an identity. Another identity,

(34) IVB - 111 - TRALS - OLY used below, is defined for disposable personal income (DEI), i.e., after tax income available for consumption expenses or savings.

(35) DPI = TP I - TD UG

Consumption and Savings

In jpecifying a consumption function for Czechoslovakia it must be recognized tiiat any socialist "consumption function" will have radi­ cally different underlying assumptions about the availability of goods and about the linkage between consumption and production. In the Czech­ oslovak case, the linkage is interrupted by planners who alter the avail­ ability of particular cons utter goods. On the other hand, specific re­ forms, especially those begun in 1967, have attempted to Institute more sensitive linkages between producers and consumers* In simplest form, consumption of manufactured goods (CM) depends on consumers' ability to purchase goods, represented by DPI. In models of market economies, the supply of goods is implicitly assumed to be unconstrained, however, excess demand for consumers’ goods lias existed in Czechoslovakia because there has been a shortage of either the quality or the quantity of goods.

To account for the supply-determined nature of consumption, the level of retail sales (PXTS) has been included to indicate the amount of goods made available to consumersThe meaning of the significant negative

(36) OLS CM - -2.480 - .0745 DPI + .555 R£X3 (1.112) (.017) (.017)

R2 - ,9973 SEE - .655 DW - 1.408 coefficient for Dll is obscured by the constrained supply of goods, a factor with whicn western models have not had to contend.One expla­ nation of tuis sign may lie in the major source of DPI, wage payments, which in turn depends heavily on plan fulfillment. Even if workers over­ fulfill their plan, their corresponding increases in DPI could not be spent due to the shortage of manufactured consumer goods. Furthermore, U :J plan fulfillment, and hence DTI, a priori 13 directly related to the num­ ber of hours worked. More working hours allow less time for leisure activities during which manufactured goods could be consumed. Therefore, while consumers have had increasing purchasing power, lack of both qual­ ity goods and the time to consume them may have contributed to decreased 56 CM, jget. par. *

The level of retail sales (RETS) includes:

"...sales directly to the consumer for his own use, receipts from repairs of consumer goods, from retail be­ spoke tailoring, dressmaking, and kindred services, and the receipts of catering establishments and hotels, boarding houses, etc. (Direct sales by industrial enterprises and other organizations to the consumer are permissible up to a stated limit, and form a negligible proportion of total retail sales recorded.)"-*^

The central planners have concentrated their attention primarily on the allocation of industrial goods, i.e., the net material product of manu­ facturing (GNYM), They have directed resources to manufacture a greater proportion of producer goods, thereby constraining the supply of con­ sumer goods. Also, the planners instituted market, retail price and

(37) QbS RETS - 11.348 + .677 CUYM + 5.481 DUM (3.650) (.030) (3.028)

R2 *= ,9887 SER - 3.623 DW - 1.547

2SLS RETS -11.378 + .677 GNYM + 5.503 DUM (3.652) (.030) (3.029) turnover tax reforms in 1967 (DUM) which attempted to increase the re- 5 8 sponsiveness of producers to consumers1 demand.

On an aggregate basis, the extensive competition between produc­ tive and nonproductive u3es of manufactured resources does not exist for services and agricultural goods. To be sure, some services and 13u

agricultural goods art: used in production or are allocated for foreign

trade, but a larger snare of thebe outputs is coiisuu.ed by the population, doreovur, supply constraints in Czechoslovak agriculture are imposed iiiore often by fickle weather than by overt planning decisions. Consumer services nave been underdeveloped until recently because of low priority from planners who preferred to divert resources into productive branches.

Therefore, consumption of agricultural goods (CA) and all other consump­ tion (CO), whose main component is services, depends on consumers' Dll and the respective consumer price indices for foodstuffs (CFIFD) and services (Cl'ISV). 1'he positive coefficients for CPIFD and CPISV reflect

(38) OLS CA - -62.445 + .464 DPI 1 ,540 CPIFD (25.232) (.038) (.199)

R2 - .9230 SER -3.819 DW - 1.182

(39) OLS CO ** -4.406 + .029 DPI + .043 CP1SV + .552 DUM (1.636) (.002) (.018) (.311)

R2 « .9653 SLR - .268 DW - 1.046 the increasing quality of goods coupled with increasing DPI. As the quality has increased, the price has increased to cover the additional production cost. However, consumers' ability to buy goods, measured by 59 DPI, even with higher prices has increased.

Social or communal consumption (CS) has depended on the amount of government funds (GLI) devoted to facilities and communal services.

(40) OLS CS - 7.253 + .183 GET + 12.915 DUM (2.479) (.019) (1.457)

R2 - .9542 SLR - 2.461 DW - 1.459

2SLS CS - 6.967 + .186 GET + 12.816 DUM (2.509) (.019) (1.464) 131

The amount of consumers' funds remaining after consumption ex­ penses is a potential source of savings* A measure of this potential is personal savings (PS), defined as total personal income less taxes, i.e.,

D M , less total private consumption. Typically, in a socialist economy

(41) Pb = DPI - CM - CA - CO sucu as Czechoslovakia's, the private investment opportunities for use of i'i> are strictly limited* Private investment Is negligible when com­ pared to that by the government planners. Therefore, various kinds of savings accounts with the state b a nk^ provide options for holding Income which is not spent or taxed. Additions to the level of institutional savings (SC) depend on the funds available, PS. Also, the number of people depositing money must be included. The urban population (UPOPJ) is employed for money wages in primarily nonagricultural branches. On the otner hand, the rural population, primarily agricultural, is paid both in kind and money. Thus, the UPOPJ is assumed to be the main source of institutional savings. Over time, T, DPI has grown faster^ than

(42) OLS SG - 199.352 + .125 PS - .031 UPOPJ + 7.701 T (54.727) (.068) (.008) (1.098)

R2 - .9808 SER - 3.008 DW * 1.130 total private consumption ( * CM + CA + CO). Consumers have had no choice but to save their excess funds.**2 hence, the coefficient for T is posi­ tive. Moreover, private consumption has grown faster^ than the UrOPJi fa3 consumption per urban resident has increased. As urban consumers have increased and spent more on goods and services, cet. par.. the larger number of consumers has had a smaller proportion of their income to save, 64 resulting in a negative coefficient for UPOPJ. 132

Evaluation of the Structural Equation Estimates

Introduction

Econometric models such as the CEN must be evaluated both at the level of the individual equation and at the level of the entire syster..

The purpose of the CLM is descriptive; not only must individual equations for endogeneous variables describe tneir real-world counterparts, but the entire system must describe real economic interdependencies as accurately as possible. It is possible that Mbest fitting individual equations should not necessarily constitute Che best fitting system.Techniques and statistics for analysing single equations have been well developed in the econometric literature. In this section, the K and Durbin-Watson

(DU) statistics, previously presented with each equation estimate, will be evaluated. Then, the CLM, as an equation system, will be compared witn selected models of U.S. regional economies and the Czechoslovak econ­ omy, Unfortunately, no standardized statistical tests are available to 67 evaluate the descriptive performance of equation systems. Thus, the discussion will be confined to comparisons of the characteristics of the selected models. A comparison of actual values with those calculated from reduced form equations, derived from the structural equations, will be presented in the next chapter.

—2 Single Equation Evaluation: R and DU

Table 3,1 presents a summary of the pattern of the statistics, i.e., adjusted for degrees of freedom, for all 32 stochastic equations.

Over two-thirds of the equations have above ,95; three-fourths are a— bove .90. This explanatory ability of the CLM equations will be compared to other econometric models below. 133

IABLL 3.1

PATTERN OF IT*

u2 End of.eneous variables

1.0 .95 IT MCG TTX TD GLO EXPM X W H GNYM GNYO EM EA EO ALF MOLF WMG TRANS TP I CM RETS CO CS SG

.94 - .90 TP CA

.89 - .85 GEMA OLY

.84 - .80 TO

.79 - .73 VOC

.74 - .70

.69 - .65

.64 _ .60 IMPA NUMIG

.59 - .55

.54 - .50

.49 - .45 EXPA GNYA

SUMMARY

_2 2 of total R stochastic equations

0 - .90 75.0 89 - .80 9.375 79 - .70 3.125 69 - .60 6.25 59 - .50 0.0 49 - .40 6.25 134

— 2 Of the four equations with R below . 70, three are related to

the agricultural sector (IMPA, LXiA, GNYA). Given the highly volatile nature of this sector, especially due to non-econoir.ic factors such as weather, it is not surprising that these equations have the lowest de­ scriptive ability. The poor performance of EXPA and IMPA has only in­ direct effects on otiier equations through the BP identity (equation 17).

As discussed above, the distorting effects of commuting, resulting from priority decisions by central planners, have contributed to the mediocre

statistic of the NGMIC equation.

The DW test for serial correlation (autocorrelation) is another standard by which a single equation can be evaluated, according to its

DW statistic. Three problems arise with equation estimates when auto­ correlation is present.

"First, we shall obtain unbiased estimates of £ , but the sampling variance of these estimates may be unduly large compared with those achievable by a slightly differ­ ent method of estimation. Second, if we apply the usual least-squares formulae for the sampling variances of the regression coefficients, we are likely to obtain a ser­ ious underestimate of these variances. In any case these formulae are no longer valid, nor are the precise forms of the t and F tests derived for the linear model.... Third, we shall obtain inefficient predictions, that is, pre­ dictions with needlessly large sampling variances."

Thus, it was important to determine if autocorrelation existed for the estimates of the OEM. To this end, the DW statistics for each equation were compared with the standard DW upper and lower bounds. From this

test, no conclusive positive or negative serial correlation was found for any equation. However, the DW test has an inconclusive range, within which no definite statement can be made about the existence of autocor­ relation. Of the total 32 stochastic equations, only 9 have DW statis­ tics which are Inconclusive at the 1 percent level of significance 133

points for the upper and lower bounds. Table 3*2 Identifies those equa­

tions and their DW statistics, because of the absence of identifiable

autocorrelation and the relatively small number of Inconclusive DW sta­

tistics , serial correlation was judged not to be a serious problem for

the CLM.

Systemic Evaluation

As discussed above, the present state of econometrics does not in­ clude standardized tests of entire equation systems. Thus to put the per­

formance of the structural equations of the CEM into perspective, major characteristics of the CEM are compared in Table 3.3 with those of selec­ ted U.S. regional and Czechoslovak models. The regional econometric models chosen were similar to the CLM because of data availability and because of the similar structure and maturity of the economy modeled.

Tne data limitations on all models are evident from a comparison of the number of observations; the CLM falls about mid-range, between 13 and 23.

The CLM is comparatively a medium-sized model in terms of both the total number of equations and the number of stochastic equations.

It falls between large models, such as the North-east Corridor (66 total equations) and Philadelphia IV (211 total equations) models, and small models such as the Massachusetts and Southern California models. The CLM is almost twice the size of the most recent annual Czechoslovak. (WS2) model.

The degree of correspondence between complexities of the real economy and the structural equations is indicated by the use of bivariate relationships and lagged endogeneous variables. If a complex economic relationship among many interrelated variables exists then as many of 136

TABLE 3.2

INCONCLUSIVE DURBIN-WATSON TEST STATISTICS®

Number of Equation Endogeneous Explanatory Number Variable Variables*1 DW

4 TTX 3 2.723

13 EXPM 4 1.483

lb GNYM 4 .834

29 WMG 2 1.191

32 TRANS 2 .944

33 OLY 1 .979

38 CA 2 1.182

39 CO 3 1.046

42 SG 3 1.130

aUpper and lower bound significance points: 1%. Number of observations ■ 20. L Not Including the constant term. TAILE 3.3

COKFAJUSOK Of THE tm WITH QTHE1 ECOUOKETUC HDDELS

K a rth - Haoaacbu- Eaat P h ila d e l­ P h ila d e l­ P h ila d e l­ Puorta Southern Lou K la alo- Caeehoiloveala • e tt* C orrid o r phia 1 phia I I I phia IV Klco > u ffa lo C a lifo ro la Aapela* Oippl Oalahooa WS1 WS2 CLM I I* ] .__ I 34 L I 31 1 I 32 ] I 51 1 .[ *2 ] I 35 ] [1JU ] t 63 1 I 2 1 E 1 [12 7 ] [ liu I

1. Kuaber of Obiervatloae I t 13 17 24 23 17 1-17 9 12 14 14 19 14 20 i . Miacber o f Equation* 14 «« 14 174 211 15 33 14 29 30 33 12 27 42

3. Nia&er of Stachoatte Equation* 4 40 17 91 101 23 23 13 19 40 23 4 17 32

4. Kuaber o f llw a rla to Spael f t * 4 40 11 13 19 4 13 10 12 4 4 0 0 5 catfoao a, farcaat of Stacheatic Isw tlo u 7S.0 44.7 40.7 14.3 l l . t 24.1 43.2 74.9 41.2 13.0 31.0 0.0 0,0 15.4

3. Kuaber af Stoc.iaatle Equation* 2 10 1 29 37 3 4 1 0 24 3 1 11 0 w ith Lap*

1. Nunher af KaatoBBM Varlakla* t 20 3 22 49 22 14 3 4 56 1 13* 43* 11*

7. Kveber af Equation* with 3 44 9 33 49 21 14 9 14 34 21 b 17 24 I 1 1 ,90 *. Ferctat of Stochottlc Iqeatloat 42.3 73.3 32.9 31.2 43.3 91.3 40.9 49.2 44.2 95.0 44.0 b 100.0 75.0 0 4 S. Jltador af Equatlooa with 1 S 1 1 0 1 1 2 0 0 1 0 I 1 1 ,70 a. F*reant of Stochottlc Squatfan* 12.3 13.3 3.9 2.1 0.0 4.3 4.3 13.4 0.0 0.0 4.0 0.0 0.0 12.5

9 . U tlaatloo Tecoalquei OLS OLS OU OLS OLS OLS OU OLS OU OLS OU OLS OU CLS tru TSU-FC Lise TSLS-PC I1V 2SLS TSLS-PC 2SLS TSLl ISIS

Hiludlot M M lut lira. h 2 “Coofficlento >1 M ltlrli M rn lH ln (*)' an nr«tt*i< U la d m c l f i t if 1 i * ■ a t aid, if id, whether thii filw baa bee* ed] noted fatJafrae* of freedon. If I t« litnfad, 4v oticed, then Eh* ta k ir of i^utlMW wich r 1 •to 1* 7 »r 17■ 51 of the owtar of ittc iu U c os sat lea*. lotat bfom tiw cntilM f 1* two M for Eh* 0.1. wfioool ■adal* w m fro * aichM (34], o> 1M. T^ l* 13b

these factors as possible should be included in the structural specifi­ cation. Approximating complex phenomena with a single explanatory vari­ able, i.e., a bivariate relationship between the endogeneous and inde­ pendent variable, ignoring the constant term, can oversimplify reality.

Of course, problems of data availability (see Chapter II) may require such simplification, however, generally, a larger number of explanatory variables includes more of reality and, in this sense, heavy reliance on bivariate specifications 1b undesirable. In table 3.3, this degree of over simplification is shown by the proportion stochastic equations which are bivariate. On this criterion, the CLM does not rely heavily on bi­ variate specifications compared to most of the U.S. regional models

(only Mississippi has a slightly smaller 15 percent than 15.6 percent).

While bivariate specifications imply that fewer interdependencies of economic reality are included in the model, lagged endogeneous vari­ ables Indicate more are included. Real economic phenomena behave in a dynamic and continuous manner. Dynamic behavior, e.g., feedback effects, is best included with lagged endogeneous variables, extending the inter­ dependencies of the model to previous periods. Thus to the extent that

Inclusion of lagged endogeneous variables increases the descriptive, dynamic qualities of the model, more lagged variables are "better" than less, however, the presence of lagged endogeneous variables introduces certain problems. The mo3t notable of these is that the classical assump- 70 tion of nonstochastic independent variables is violated. Theoretically, this requires special estimation techniques.^ In practice, however, most model builders ignore this difficulty and apply the OLS or 2SLS estimator. 139

Another problem with the inclusion of lagged endogeneous vari-

— 2 ables Is related to their effect on the R of the equation. Because a high correlation usually exists between the values of an endogeneous variable in periods t and t-1, the addition of a lagged dependent vari­ able as an Independent variable to any structural equation generally will

—2 Increase the R . Ihe addition to the economic meaning of the equation is at best marginal, 72 that present behavior is determined by past be- — 2 havior. Thus a model builder can increase an equation*s R to a high 73 level without adding much additional economic sense.

A more important conceptual problem is similar to that involved in the no autocorrelation versus first-order autocorrelation problem in

Chapter 11. That is, given the complexities inherent in the economy, it i3 not clear that including a single additional variable lagged one per­

iod yields a significant improvement in realism over excluding it. In the CEM the explanatory power of an equation with no lagged variables is 74 as high as with a variable lagged one period. Several explanations of these results can be given. One cause can be attributed to

"data problems in that the true lags need not necessarily be integer multiples of the sampling Interval of the avail­ able data and there will almost certainly be added measure­ ment errors to the true values of the variables being con­ sidered."'^

In terms of central planning, annual data capture neither the short-term

lagged behavior which adjusts in months or weeks nor the longer term in­

terdependencies from, e.g., long range plans. Also, the complex inter­

relationships from central planning suggest a more precise specification than a single lagged variable might require variables for many different

lags. As with the autocorrelation problem, there are practical time and 140 computer resource limitations which must be considered in any attempt to discover empirically the correct lag structure.

Finally, the most important obstacle to the inclusion of lagged behavior in a model of a centrally planned economy is one of data avail­ ability . In contrast to western economies, relevant past behavior in centrally planned economies includes not only the past actual values of variables but also the planned values of those variables. Lagged endo- geneous variables in an econometric model are important primarily for their relationship with their planned counterparts. The difference be­ tween last year's planned and actual performance of a particular vari­ able should, a priori, influence planners' actions this year, and also the actual behavior of that variable this year. For example, if the actual personal consumption level was greater than the planned level last year, planners would likely react by increasing both planned capital goods output and the inputs required to achieve that target. Or, if actual output in a branch was below planned output previously, this year's targets would be revised downwards. In either example, current actual levels would be affected by past differences between planned and actual levels. Therefore, the proper specification of lagged behavior for a particular current endogeneous variable, say y^, would be

y± - f(yj(-D - yj(-i)) where y^(-l) ■ lagged actual variable

y^(-l) » lagged planned variable corresponding to yj(-l).

For the case i - j, a lagged dependent variable is indicated.^ For i j , an endogeneous variable other than the dependent variable is in­ dicated. The major problem with the above specification is that 141 consistent time series data for yp or y^(-l) are not available,^ Hence, J J estimation of the proper specification must await the development of data on planned variables.

There are several implications of the above specification. Gen­ erally, inclusion of y^(-l) alone represents a misspecification. Even if a lag structure of an actual variable were successfully estimated with­ out its relationship to planned behavior, that result could be interpre­ ted uith the above model. If planned values are always below actual levels, i.e., the plan is never fulfilled, this could lead to a signifi­ cant coefficient for the lagged actual variable alone. However, in light of the above model of lagged behavior, such a lag structure would repre­ sent a misspecification. Thus, in addition to the above explanations, the importance of the difference between lagged actual and planned levels helps explain the failure of attempts to include lagged actual variables in the CEM.

With these comments in mind, the CEM with no lagged variables is more simplistic than other U.S. regional models but is less subject to problems of estimation and improper specification. In the construction of the CEM it has been Implicitly assumed that a simple specification, i.e., no lags, with an R^ and SER equal or superior to that of a more complex specification with lags Is preferred because the degree of approx­ imation to reality is known. However, the correctness of the more cos^ plex specification, especially one with a larger mean squared error, is much less certain. Moreover, from Table 3.3 it is seen that, with the 78 exception of the W S 2 model, the other models do not rely heavily on lagged variables. 142

Comparing the number of exogeneous variables, the CLM is In the

mid-range with 13, nearly the number of the buffalo model. Generally,

the number and choice of exogeneous variable depends on the particular

use for the model. Discussion of the importance of this choice for the

CLH will be deferred until the next chapter on the reduced form equations.

The proportion of stochastic equations in the CEM with R? - .90,

i.e., "good” descriptive power, is 7b percent. This proportion of good

equations is in the same range as the regional models in Table 3.3, a

comparatively respectable performance. The group of good CEM equations

is not as large proportionally as that in the Czechoslovak built models.

Several reasons can be given for the better VVS1 and VVS2 models: dif­

ferent purposes in constructing the models (i.e., forecasting which — 2 leads to higher R ); better access to data and original definitions used

to construct the data; more familiarity due to physical proximity with the complexities of the Czechoslovak economy; predominant use of lagged variables in the W S 2 model.

The CEM does have a higher proportion of “bad” equations, those with R ^ .70, than the regional and other Czechoslovak models. However,

the low descriptive power of three of the four equations can be explained by the instability of the agricultural sector due to exogeneous non­ economic factors, e.g., weather and politically based planning deci- 79 — 2 sions. If the R values for the three agricultural equations (for

GNYA, LXEA, IMFA) are excluded, the proportion of equations with R S .70

falls to about 3 percent. This is well within the range of the percen­

tage for the regional models.

In summary, the CEM as an equation system is the equal of a typi­ cal current U.S. regional econometric model in descriptive performance. See, footnote 75 i^t Chapter II.

The independent variables with t-value less than 2.0 are as

follows •

Equn. Dep. Indep. Estmtr. t-value d.o.f. Sig. number varble. varble. leve]m 18 GNYK IKPM OLS 1.81 15 10 2SLS 1.76 15 10

23 EA NUT’TIG (OLS 2.59) 23LS 1.68 17 > 10

28 MOLF UPOPJ OLS 1.95 15 10 2SLS 1.94 15 10

57 RETS DUE OLS 1.81 17 10 2SLS 1.82 17 10

59 CO DUE OLS 1.77 16 10 2SLS 1.74 16 10

42 SG PS OLS I.8 4 16 10 2SLS 1.94 16 10

For an introduction to the problem of identification, see

Fisher [_47l , Chapter 1. Other econometrics texts discuss the identification problem, but in less detail than Fisher.

Ibid., pp. 45, 52-56.

Ibid., pp. 40-41, Corollaries 2.4.1a and 2.4.1b.

Ibid., p. 40. This result is interpreted within the context of recursive systems as the Generalized Order Condition,

Corollary 4.6,1, p. 106.

Ibid., p. 15. 144

8 This conclusion coulcl have teen established with the use of

the rank condition, Fisher's Theorem 2.5,1 , p. 37. However, in

view of the following discussion, it was judged not to be ne­

cessary. Moreover, the number of restrictions on each equa­

tion is very large, bee also Fisher [4i] , p. 45•

9 L'Esperance |_9l] » P- 791*

10 See the next section for a justification of the behavioral re­

lationships involved in each equation.

11 This section draws heavily from Chapter 4 of Fisher |_47] on

the theory of (block) recursive equation systems. The primary

motivation for grouping the equations of the CEM into recursive

blocks is to simplify the problem of identification, e.g., to

reduce the size of the matrices required for the application

of the criteria for ident iflability. Also, while an equation

may be over-identified with respect to the whole system, it

may be just-identified with respect to a particular recursive

block. Thus, the choice of estimators depends on the isolation

of blocks of equations within a model by the inherent causal

ordering.

12 One difference in the following analysis of the identification

of the equations would be that treating each of the equations

as a separate block requires the assumption of a diagonal var-

iance-covariance matrix for each block; see Assumption 4.2.2,

Fisher [47], p. $ 6 , Combining all such sub-matrices for each

equation of block III, the resulting matrix for an "aggregated"

block III would be strictly diagonal. However, this is a more 143

strict assumption than if block III is considered as a group of

enactions; with respect to the vnr irevoo-covariance natrixfX ,

for the whole Cell, .it is only necessary to as some block diagon­

al it.y; see Assumption 4.4.?, P.,99. This means that each sub-

natrix of £ for each block need not be diagonal and hence is

less restrictive. For comments on the realism of the block

diagonality assumption, see footnotes 14 and 16.

13 Fisher [_47], p. 121.

14 As discussed in Chapter II, due to the permeation of the cen­

tral planners1 influence throughout the economy, it is unlikely

that Z is block diagonal. This is especially true of the re­

lationship between blocks I, foreign trade, and II, basically

production (including incuts and outputs) and government, be­

cause of planners' control. Consumers have some autonomy,

although not as much as in capitalist economies. Thus the as­

sumption of the block diagonality of £ is more likely to hold

for block III with respect to the other two.

Moreover, the patterns of multicollinearity and autocor­

relation introduced by the existence of central planning are

very complex and, in general, unknown. Perhaps the best solu­

tion to include the influence of central planning would be to

estimate all of the equations of the CEM simultaneously with

three stage least squares(3GLS). However, technical problems

with 3GL5 computer programs have prohibited this. V/ith nei­

ther the possibility of 3SLG estimation nor prior information

about the effect of central planning on Z , the most oractical w >

solution night hove been to follow thct of Chapter II and a

assume £ was dia-onal. This assumption v/ou 1 d ulace additional

restrictions on £ which would increase the de.gr ne of over-iden­

tification of each of the equations. These restrictions were

not considered in the following discussion of the identifica­

tion of specific equations.

The influence of central planning throughout socialist

economies raises important questions for socialist econometric

models which will not be considered in this study. With re­

spect to the block recursivity proposed (in the text)

"we are not justified in studying only a part of that structure \mless we also believe that the random disturbances which influence the prede­ termined variables are not correlated with those from the equations under study— the disturbances which influence the endogeneous variables," (Fisher [_Ai] * PP* 101-10?)

15 Ibid., pp. 100-101.

16 Recall that block III could be treated as five separate blocks,

each with a single equation for which the number of both ex­

cluded exogeneous variables ana included er.iogeneous varia­

bles equals zero. Thus the generalized order condition,

Corollary Fisher [_4ll * P* 106, held. Moreover, from

the discussion about the aggregated va.riance-oovariance matrix

in footnote 12, a sufficient condition, Corollary 4*9.1 ("If

B is triangular and £ diagonal, every equation is identifia­

ble," Fisher [_&l] , p. 120, also was sattfied. However, Fisher

warns, pp. 97-93: "Too often, investigators who encounter a simultaneous system with a trianf"ular B proceed to use least squares 147

as a consistent estimator, -Tor/retting: that such tr i­ angularity doon not its e lf suffice even to identify the last li - 1 equations of the model, let alone imply the consistency of least squares. To apoly least squares or, indeed, to identify the last ” - 3 editions without other informstion on the coeffici­ ents of the model, the assumption of the diayonality of £ is necessary as well as sufficient. The inves­ tigator in ouch a situation should think carefully about whether he is w illin g to make such an assump­ tion, particularly if a ll that is to be gained is the computational convenience and fa m ilia rity of ordinary least squares.”

17 Ibid., pp. 37, 105-106. See also footnote 14.

18 The generalized order condition, Corollary 4.6.1, yielded the

conclusion that the EXPM equation was under-identified because

of the large number of included endogeneous and exogeneous

variables relative to the total numbers of each in block I,

However, the HP identity placed additional restrictions on the

equation. Note that if Z is assumed to be diagonal (as dis­

cussed in footnote 14)» the additional restrictions would

serve to over-identify the iiXPK equation.

19 Fisher l47j » p. 106, See also \_4l2t P* 45*

20 However, it should be emphasized that the order condition is

only a necessary condition for identification and does not

account for interrelationships among equations which affect

iaentifiability.

"Kore generally, the order condition gives the minimum number of independent re strictions which must be available in order to distinguish the firs t equa­ tion from the other equations of the model. 33ven if that number is available, however, the restric­ tions may not in fact suffice to distinguish that equation. Indeed, they w ill fa il unless there are net only li - 1 independent restrictions but also 1-1 - 1 independent restrictions which are obeyed by the firs t equation but not by any other linear com­ bination of the conations of the model ... In particular, restrictions which acre obeyed by a ll the equations of trie model give no help what so­ ever*” l 47 > * p* 42,

Fisher continues in discussing a particular examrle (p. 44):

"It is interesting to note, on the other hand, that a restriction on the firs t equation nay be of assistance even if it is obeyed by another equation of the model (so long as it is not obeyed by a ll of th e m )• ”

Additional restrictions on the firs t equation are necessary to identify it with respect to the other equations with common restrictions, see t47i, p. 44*

From this standpoint, four equations of the C-'XT, those f o r IT , TP, TO and OLY, may have p o t e n t ia l problem s because each has identical expianatory variables. One solution, if necessary, would be to assume specific restrictions exist on

JJ. Another, perhaps more pragmatic solution, would be to re- specify three of the four equations, e.g., TP, TO and OLY.

Alternate specifications including a time trend and/or lagged v a lu e s o f GITY were estimated but rejected. Either their ad­ ditional explanatory power, mer-sured by the standard error of the regression and R , was less than that of equation (l) or individual variables were not significant. For example,

Explanatory variables ~2

C o n s ta n t, GTQf(-l). T .9724 3,562 149

Variables underlined wore significant at approximately the 10

percent level— t-ratio = minimum 1.70.

22 Jee Garvy [30] , pp. 16, I 5O-I56.

?5 Grossman L611 , p. 35, and Spulber [122], d. 165, U n fo rtu n ­

ately, sufficient time series data on enterprise and other

credits were not available and thus the 034 was restricted to

out stranding- cash. If data were available, a credit equation

could be estimated which, due to the practically in fin ite ly

e la s t ic c r e d it su p p ly , w ould be demand d e term ined .

24 See Pelikan [ 107] , As discussed in Chapter 1, a primary leak­

age o f cash to wage e a rn e rs was due to th e overspending o f

wage funds to provide additional incentives to fu lfill the

plan. Planners have preferred successful plan3 to absolute

control over cash because consumer spending has been restricted

by the supply of consumer goods. Because planners have not re­

sponded to consumers' demand for cash in any consistent and

meaningful fashion, the monetary equation, ( 3) below, is

supply oriented.

25 That is, one way to eliminate a government deficit is to draw

down the currency held by the population and use those funds

to pay government debts. This behavior would justify th e pos­

itive coefficient for D.

26 See Adam [_l] for a detailed discussion of the Czechoslovak

tax structure. Prior to the revision, some subsidies to fam­

ilie s were in the form of lowered taxes. The major provision

of the revision was an increase in the taxes of parents with 150

more; than one child; a;-; comrensat i on, direct family allowances

were increased. "Thus, the support of children has been re­

moved for the most part from the sabere of the income tax'1

(L lj, PP. 70-71).

2? As discussed extensively in Chapter I (e.g., see footnote 91,

Chapter l), with the 1567 price reforms and the reduction of

TTX, enterprises were allowed to retain higher profits. How­

ever, when DUM was included in (6) fo r symmetry with (4)» DUK

was not significant. Moreover, an additional (slope) dummy

variable for changes in the effective tax rate was tested and

found to be insignificant in both equations ( 4) and (6). A

partial explanation for this result may be the high degree of

aggregation of TTX and TP. Because the price reform was im­

plemented fo r over 24*000 groups of goods (see Chapter l) ,

the aggregate effect on TTX may include offsetting rate

changes.

26 Alton, et. al., L7.], p. 90.

29 Michal |_98] . PP* 165-170.

30 Gee Hove [lO ^j , p p . 214-215. Moreover, Gregory and Stuart

[^60] state "imports and exports nay be manipulated to serve

as balancing items in the national plan," p. 276.

31 Van Brabant [^13d] , Chanter 5.

32 I b i d . , C hapter 4.

33 A proxy for the demand of western nations, an aggregate GitF

measure for major itifdbers of the Organization for Economic

Cooperation and Development, excluding the United htates, was 131

touted in bo*:h export orur-tioas, (15) rind (14) , but was found,

to bo insignificant. The data for t'- is aggregate GUP wore con-

piled from the sane source, [13^ , an the data for (A-UA.

34 Estimated by the U.S. Arras Control or 1 "Dirarmament Agency

l 13^‘ in current U.S. dollars. CKXA is the only nominal vari­

able in the nodal.

35 Another version of (13) was tested in which IM?M replaced CUhA.

While IKPM was significant, in order to link the foreign trade

sector, and hence the Cif , to the Soviet block, the present ver­

sion was chosen.

36 Various combinations of CXEA, DUX and T, together and separ­

ately, were tested in (14)» but none was significant. Also

other variables were tested but re.jccted because of insignif-

icant coefficients, lower R , or higher GER: —2 Explanatory variables R SER

Constant, BP, I1TA, DAG .4691 .137

Constant, DP, DAG .09^9 .182

where DAG = GUYA - GUYA(-l) and the underline denotes a t-ratio

of at least 1.70. Also, 3P(-l) and DAC(-l) were tested tooth­

er as explanatory variables, but neither was significant.

57 Both DUX and T were tested in equations (15) and (l6) but nei­

ther was significant. It should be noted that in some emer­

gency situations, notably the crop failures during the I96 I-

19^5 recession, planners could not balance iir.uorts and ex­

ports within the sane connodity group, for exan.ole, food im­

ports were at tines balanced by manufactured exports. However, oven in e u c '° situations, insofar as possible, planners

desired to balance all imports with all exports, i.e., keen

BP close to zero. ?or this reason, the proxy for overall bal­

ance of exports and imports, BP, was used. Other specifica­

tions tested included two with legs:

Explanatory variables R2 SER

Constant. CRY, IITVKA(-l) .9144 1.715

Constant. GITY. INV(-l) .9383 1.455

Constant, GNYT4, IRVNA .9 6 6 4 1.109

where IITVKA and INV were inventory-type measures for manufact­

uring and agriculture (ihVTlA) and total (IITV), The underline

denotes a t-ratio of at least 1.70,

38 Other specifications tested included: — 2 Explanatory variables R SER

Constant. GMY, INVHA(-l) ,1821 .5 6 7

Constant. GNY, I1TVMA .1147 .371

Constant, BP, DAG .2921 1.861

where INVMA is defined as in footnote 37 and DAG is defined

as in footnote 3 6 * Also, BP(-l) and DAG(-l) were tested to­

gether as explanatory variables, but neither was significant.

The underline denoted a t-ratio of at least 1.70.

39 For a discussion of Czechoslovakia's more recent balance of

payments structure and policies, see Snell [121] pp. 694“699,

40 5ap and Dubsky 19^9, L27.lt P- 21.

41 In particular see Toms and Hayek \J>2] and L^32j for Cobb-

Douglas estimates of various Czechoslovak production functions. For example, oris true t ion materials, sawn lumber, etc., Note

also that mining; is included in manufacturing; this classifies,

e.g., coal and iron ore as manufactured raw mitorials (or semi—

manufactured goods). IIIPA was tested in (13) but was not sig­

nificant.

An alternate specification, similar to the equations for GNTIT

and GUYA, with other employment and other capital stock as ex­

planatory variables was estimated, however, that equation had

considerable less explanatory power than (20) and thus was not

perferred to (20). Also, inclusion of employment or capital

stock did not yield significant coefficients or increase the

explanatory power of (20).

See Ilyers JJ.02J , PP* 169-200, especially Table 1?.

See Basovsky J_13] for a detailed analysis of regional migra­

tion patterns in Czechoslovakia, I96 O-I969 .

Unfortunately, no detailed definition or description of com­

pilation proceedures was included in j_44] and (_124] *

sources of the data.

The specification of Czechoslovak migration differs from the

U.S. regional econometric models because of the lack of inter­ national, the analog of interregional, Czechsolovak labor mi­

gration. The accepted western assumption acknowledges freely

competitive labor markets, that labor will migrate to the re­

gions with the higher wages and available jobs. Thus, for

example, in the Philadelphia III model [ 52j the total labor

force depends on population and the unemployment rate lagged 134

one rerial. Population, in turn, is "eluted to the natural

growth rate and lagged GhPf the latter variable representing

job oonortunities which induce intcrre~ional migration. Thus,

migration is only implicitly.specified in that model.

43 Goveral other specification? were estimated without success.

These included a wage differential between agriculture and

manufacturing (WDhIG), the level of total national income and

the level of national income from manufacturing. One year lags

were similarly unsuccessful, most likely because of the promin­

ences of commuting a substitute for migration. Specifications

tested included: ~~p Explanatory variables R ShR

Constant, GHY(-l). VDMAG(-l) .4423 2 0 .3 0

Constant, ONY. WLKAG(-l) .4763 19.67

Constant, VfDIl-.G(-l) .1393 24.44

where the underline denoted a t-ratio of at lea3t 1.70.

See also Chapter IV, Application 4.

49 No single wage is available for the other sector; the average

annual wage in the socialist sector (WOO) is used as a proxy.

50 Meyers [l°2], P* 457.

51 Output in manufacturing, approximated by GNYM, was not signi­

ficant when included in (2 6 ).

52 Moreover, data on property-type income is not available and

would be extremely difficult to estimate. One major problem

would be to estimate or even assign realistic rates of return

on investments. 53 The total wa o bill 3 V:at:Id not bo confused with t no various

ware funds used ir. soci ~.l1st account in ' schemes at various

levels (e.g., enterprise, branch or national).

54 This constraint on supoly is recognized by Czechoslovak econ­

omists; for example see Janacek [7 6 j , pp. 59-60, on the present

structural disequilibrium, in the consumer floods market, e.g.,

for housing and automobiles. For an alternate specification

of the supply constraint see Sujan [127[|. Some initial work

on aggregate consumption functions has been done, e.g., by

Vanous [139] Anaceic L9j » anc* 31ama (_88.j .

55 The undersirable conclusion could also be drawn that all Czech­

oslovak manufactured consumer goods are inferior, however, be­

cause R>1TS is included in(36), this interpretation is not en­

tirely correct.

56 A consumer price (cost of living) index for manufactured goods

(CPIMF) was included in (36), as suggested by simple demand

theory. However, CPIMF was not significant. If RLT3 was

omitted both DPI and CPIKF were significant but the explana­

tory power of the equation estimate was considerably less tlian

that of (3 6 ).

57 £ap and Dubsky 1968 L?7j» p. 92.

58 Consumer nrice (cost of living) indices for manufactured goods

and all goods were included in (37) but neither proved to be

significant at the five percent level.

59 DUK was included in a previous estimate of (38) but was not

significant. 156

60 Por a nore complete description of the various savin-e account

options oper. to Czechs and hlovaks, nee Polikan plO?; • X —X 61 Sin.nle avo rape annual mrewth rates, ‘t t-1 . are the basis for Xt-1 comparison.

62 See Pelikan (_107'f PP* 51-32, Table 17: Comparison of two sur­

veys on the purpose of savings in 1965 and 1970 shows an in­

crease in the proportions of savings held without a specific

objective (21.5 to 32 percent). This increase is due to ex­

cess liquidity and. shortages of goods and services,

63 It is assumed that the growth rate for private consumption of

the entire population is representative of the urban popula­

tion (consumption deha is not avaiable by location). I-.ore

likely, the urban consumption growth rate is higher than that

for the entire population. The high degree of consumption in

kind, not completely included in CK, CA or CO, occurring in

agricul tural rural areas tends to bias the agcre-gate private

consumption growth rate downward.

64 The positive coefficient for FS in (42) also supports the

negative coefficient for UPOPJ, if private consumption is an

increasing function of UPOPJ. The reasoning is as follows:

SO is directly related to PS (by the positive coefficient).

PS is inversely related to private consumption. Therefore,

SG is inversely related to private consumption. Private con­

s' unotion is directly related to UPOPJ and therefore inversely

related to GO.

65 Klein |30] p. 73. 3-57

Cf .'''or a brief rovirv.' eoc Clicknan t 54 ,, pp. 162-165; for ar. ex­

tend'd discussion roe Christ [ 51 ■, feet ion IV. f>7 for example, see Glirhems.n'r; discm.iron j_54 ! , pp. 163-16?, of

the problems in eval Matin;; equation systems. he so- -ests com­

parison of mean a verm e percent error (t-'AP.l), root m-'-an square

error (hjhSIl) or Theil's "U" coefficient. However as ccr. be

seen from the definition of these statistics (Glickman’s

footnote 3* p. 164). each depends on the magnitude of the de­

pendent variable. Thus* comparisons involving such statistics

are valid only between equations with the same dependent var­

iable. See also Hloin LBOj and [fill *

63 Johnston* [77] , p. 2 4 6 ; these three assertions are then proved

on pp. 246-243.

69 For further explanation of the DV test and its application,

see Johnston [_77], pp. 249-252.

70 fee Theil (_13\i > p. 136, and section 6.4, pp. 258-265, for

further elaboration.

71 See Dhrymes [3 8 ] for a complete discussion of this problem and

its solution.

72 However, see Grander and Hewbold L58] for an alternate view.

75 Note: a. This problem does not occur if the lagged variable

is not also the dependent variable, b. Inclusion of a lagged

dependent variable may be advisable to eliminate autocorrela­

tion (see Granger and Kewbold [_53])» However, as discussed

above, no e.utocorrelation is present in the CUM. Thus, this

is not a valid reason for including lagged dependent variables. 130

74 S--o footnotes ?1, 36* 37» 38, 4b for examples ol' lags which

Vv.ro t e g t ej.

73 Granger ar.d kov;bold ( yh , p. 13.9* Cf., footnote 38 in Chap­

ter II.

76 The similarity with the adaptive expectst ions model (e.g. ,

Dhrymes |_38|, p. 56)» including- the unobssrvability of true

planned values, is noted but not pursued in this study.

77 See also the Conclusion of this study for further comments.

Planned data is at best sketchy and very likely inconsistent.

At worst, it is simply unavailable.

78 The WS-2 model j_l30Jv/ar; constructed primarily for forecasting

purposes rather than descriptive pruposes. Forecasting models

generally contain more lagged relationships to decrease the

number of forecasts of exogeneous variables required and to

increase the statistical explanatory power of the equations

(i.e., to make the fitted values "track" closer to actual

values), Cf., Granger and Uewbold (_58j , p. 119» for a dis­

cussion of "good" models.

79 In U.S. regional economies, the manufacturing sector is the

most unstable because of changes in demand. CHAPItK IV

TtiE REDUCED FORM OF THE CEM AND ITS APPLICATION

Introduction

In this chapter the reduced form derived from the preceding OLS and 25LS estimates of the structural equations of the CEK is presented and applied to several problems. The first section of the chapter con­

tains a discussion of the reduced form equations. Estimated values from each of the reduced form equations are compared with actual values and 2 are evaluated on the basis of the Q measure developed by ball [10].

Specific comments on the interpretation of reduced form coefficients are included as necessary in the discussion of particular applications of the C l.H,

The remaining sections of this chapter contain applications of the reduced form of CLK. Each application has a brief introduction with background information and a statement of the problem which was solved.

Then, the methods and assumptions necessary to apply the reduced form are explained. Finally, a summary of the results of the forecast or simulation is presented and briefly discussed.

The CLM was used in the following applications. Alternate fore­ casts for 1973-1980 of the endogeneous variables were made. Also, by manipulation of the exogeneous variables, the effect of several counter- factual historical scenarios were sioiulated for the Czechoslovak econ­ omy. Fur the first scenario, it was assumed that the 19b7 reforms did

139 160 not take place. In the next application, the share of investment allo­ cated to manufacturing in France was imposed on Czechoslovak total in­ vestment. Finally, recognizing the extremely high rate of commuting in

Czechoslovakia, the effect of an exogeneous shift in the residence of the population was simulated.

The Reduced Form Equations of the CUM

From the structural equations of any econometric model,

B^+G_z“ ii , the reduced form can be derived by simple algebraic manipulation:

£ “ B“^G _z + _u .

The relationship between each endogeneous variable of the CEM and all the exogeneous variables was derived and is presented in Table 4.1. In the above notation Table 4.1 contains the B“lG matrix of reduced form coefficients. Because no lagged endogeneous variables were included among the exogeneous variables,^ the reduced form is identical to the final form. Thus the coefficients listed in Table 4.1 are also the im­ pact multipliers of the CEM. To help the reader interpret Table 4.1, the symbol for each endogeneous variable is listed to denote the row of multipliers for that variable. A particular multiplier for an endogen­ eous variable is chosen by consulting the appropriate column heading for the desired exogeneous variable. For example, the Impact multiplier of

UPOPJ, urban population, on XT, total investment, is .00854: each mil­ lion persons increase in UPOPJ leads to an increase of ,00854 billion iyb7 Kcs. In IT.

Because it includes the complete impact of each exogeneous vari­ able, the reduced form was used for forecasting and simulation rather TABLE 4.1

MATRIX OF REDUCED FORM COEFFICIENTS

CONSTANT CPIAL CPIFD CPISV CME A IM IA IT -157.66657 0.0 0.0 o .o -0.01897 0 .43575 0.0 10 -157.66657 0.0 0.0 0.0 -0.01897 -0.564?* -1.00000 MSG 45.89792 —U.U106 1 0.0 11. 0 0.00423 '0740728 o.?8'7r? TTX -17.00707 -0.1V732 0.0 0.0 -0.00625 0.13909 0.0 TD -4.57277 0.0 0.0 0.0 —0 *00163 0.13811 0.0 TP -212.42628 0.0 0.0 0.0 -0.02435 0.55908 0,0 TO -20.60287 0 . u 0.0 0.0 " -0.00238 0.05474 0.0 R -254.60989 -0.19732 0.0 0.0 -0.03462 0.R9102 0.0 GEM A -312.41215 -0.10179 0.0 0.0 -0*03721 -0.68205 -l.??OR? GEO -395.03101 0.04468 0.0 0.0 -0.05034 -1.20441 -? •70 6*'3 GET ' -707i4 4 3 1 7 -"0 ."057n ■0.0 0.0 "'-'0.0 675-5" '-1.88647 -4.02638 D 452.83328 -0.14022 0.0 0.0 0.05294 2.77748 4.C2635 FX PM 0.58162 0.0 0.0 0.0 0.01896 -0.00000 0.0 FX PA I „

KM KA BPOPJ UPOPJ PRWOM DUM67 IT 0.79169 0.06714 0.01299 0.00854 -0.86403 4.49245 -2.67247 in Q.?Q IfeP Q .06714 Q.01299 0,008 54 -0.86403 4.4924 5 67247 m -(T 7 0 6 505=0ros =0702291 -0.00442 "-OTOOOPF* — 0TCT8C46 3". 2 70 84 0.8 7133 TTX 0.09615 -0.00000 0.00779 0.00355 -0.49420 -2C.28103 -0.4 5840 ID 0.02508 - 0.00000 -0.00035" 0.00156 -0.16073 1.50409 -0.05639 TP J7..37_425_ 0.08615. — 0..01667. 0.01095 - 1.10860 5.76404 -3.4289? TO 0.03664 0700843 0.00163 CT.001TT7" 0710854” ”0. 5 6 4 3 4 *0.3 3571 R 0.53212 0.09458 0.02574 0.01715 -1.87207 -12.44856 -4.7 7942 GEMA 0.57201 0.1377? 0.0317? 0.01457 -1.54096 -18,93775 -5.54740 GED 0.77386 — 0.156.19 .0^ 0 2 7 2 2 . 0.0?613 -2.61855 -27.98528 —6 • 4 3 6? 1 GET" 1.34587 0.29591 0.05905 — 0 Y 0 4 0 T D - 1595T" ~-4"6V 9"? 30 7 -1 1.98 361 D -0.81375 -0.20132 -0.03331 -0.02355 2.28744______34.47447 7.70419 FX PM -0.00000 - 0,00000 0.00000 -0.00000 -O.OOCOO -4.7692C 0.R385R EX PA 00000- -0.00000 0-00000 0.00000 j ^ K O C O O O -u._00085 _ 0.00015 "THPM" 0.00000 0.00000 o .o o o o c ~ 0 7 0 0 0 “OTr 0 7 0 0 0 0 0 “ - 4 .00411" ”0.70406“ IMPA 0.00000 0.00000 0.00000 0,00000 -0.00000 0.15867 -0.02790 BP - 0,00000 - 0 . 0 0 0 0 0 “0.00000 -0.00000 0.00000 -0.92461 0.16258 G^YM 0.04419 0.02015 -2.80389 9.26118 -2^ 6 0077 G v r r w r n - 0,028 45 =5 7 0 0 5 W " T . 6 9 9 T 6 ■=172295?" “ 1.99T68- GNYO 0,23480 -0.00000 0.0190? 0.00867 - 1.20686 3.9B623 -7.5 5675 GNY 0,78030 0.17962 0.03475 0 •02?84 -2.31139 17.01789 -7.14970 FM .158 08 0.0 --0.0______JO .3.4 67.2____ g. -22.00238 _2.61512______5 ? . 68145 FA---- 0.0 0.0 -1.38763 -0 J.61557 —5 3 • 15756 -97.62712 FO 0.0 0.0 0.70212 0 .09215 67.70379 35.38000 30.71012 ETOT 0.0 0.0 -0.83378 -g .04272 128.31698 -15,16244 -14.23555 NUMIG .01314 -1.82921 -17.1619? 4.3 7977 TCP--- - H r M m 1 — 4 72"tfFSr 8T749673 -58.96"4T4” "=95.51506" MOLF 0.0 0.0 0.63487 0 .78945 16.37??0 27.43389 96.46201 WMG 0 .0 0.0 0.00450 0 *00205 -0.28572 -7.68070 0.68412 WOG 0.09225 -0.00000 JQ^O 10 3 7 ____2..00473 _Tl2.75845 -4.22061 -0.56421 TFATO" 0.33311 0.06752 0.01145 g 70TT78" ” 1713797" -13.9881V -2,7 488 0 CLY 0.07933 0,01826 0.00353 9 .00232 -0.23499 1.7218? -0.77684 TP I 0.25525 -0.00000 -0.00357 0 •01604 -1.63577 -19.26207 -0.5 7390 TUB -0.15719- -O-^Q 8 5-78 iQ_«0165.5____ 0 .00235 -0.26280 -6.49578 „ 2 , 90173 DPI ’ 6 . ?3T)17 -oT ooooo -0,0032??701"447" "=T7475Crr ■=2G7T661”6' -0Y5T75T PS -0.07098 0.00000 -0.01845 g .00085 0.19503 -19.14365 0.67514 SG ‘0.00885 0.00000 -0.00230 *9 .03103 0.02433 -2,28851 7.7854? CM _0.,.1P73.3_ _rO_tOjOOjQjCL _o,.Qi£az 9,. 0 0 6 4 8 -0.94715 8.07293 rO.93776 PFTS'" 0.36909 -0 .00000 0,02990 0 70137S- "=1".8"9713 ^11776879" -1.75970 CA 0 . 10686 -0.00000 -0.00149; 0 .00672 -0.68481 -9,64100 -0.24026H CO 0.00673 - 0.00000 -0.00009 0 .00042 -0.04311 -0.05444 -0.01512^ CS 0.24981 . 0.05492 0.01096. 0 .00755 -0,77207 „ .4.10618 -2.77434 lOi than the structural fore. Therefore, in addition, to the evaluation of the structural equations presented in the previous chapter, it was nee- 3 essary to evaluate the reduced form equations. Unfortunately, the sane problem arose in evaluating the reduced form as the structural form— no standardized tests were available to establish the quality of the estimates. Two non-standardized tests of the performance ex post of the reduced form are usually nade.^ For the first, the '’static*' test, actual values of the exogeneous variables are combined with the reduced form coefficients to estimate the time series for each endogen­ eous variable. If any lagged endogeneous variables are in the model, the value assigned is the actual one. The resulting estimated values then are compared with the historical values to determine the goodness of fit of the model. For the second test, any lagged endogeneous vari­ ables are assigned the value generated by the model for period corres­ ponding to the lag. Thus, because the model is used dynamically, this second test is referred to as a "dynamic" test, however, because the

CLM has no lagged endogeneous variables, static and dynamic tests are identical and no distinction need be drawn. The test of the CEM, dis­ cussed below, is essentially a static one.

To evaluate the performance of the CEM reduced form equations, estimated values of the endogeneous variables (y) were calculated with actual values of the exogeneous variables:

A — 1 £ - B A G £ .

The measure designed by ball [10] to evaluate the degree to which calculated values approximate actual ones,^ was the basis of compari­ son.^ The measure for each endogeneous variable was calculated and 164 2 is presented in Table 4.2. An equation with a high q measure, e.g., above .70 or .30, was judged to have a good fit, i.e., more closely

following the real behavior of the endogeneous variable. From Table 2 4.2 the equations were ranked by Q and the resulting distribution is 2 summarized in Table 4.3. Within each range of Q , the variables are not listed iu any specific order. Comparing Table 4.3 with the distribution of statistics for the structural equations (Table 3.1 in Chapter III), it can be seen that the variables are grouped iu similar relative posi- 2 — 2 tions. The distribution of Q and K based on the 32 stochastic equations 2 is identical for the "better" endogeneous variables (i.e., those with R 2 and Q i .70). The "better" (more descriptive) structural equations cor­ respond to the "better" reduced form equations. The group of reduced form equations witli less than desirable descriptive ability, i.e., those with Q C .70, is identical but has a wider spread than the correspond­ ing group of structural equations. Poorly performing reduced form equa­ tions have resulted from structural equations (for the same variable) with low explanatory power. The poor performance of D resulted from its definition as the difference between the levels of R and GET, both of which are explained well by the reduced form. As is to be expected, it is easier to explain levels of two almost equal economic aggregates than their difference. The poor performance of BP is a combination of the previous problem of differences in levels and the poor performance of the LXFA and IMP A equations* Thus, the impact and intportance of the specification of structural linkages on reduced form performance is evi­ dent. TABLE 4.2

Q2 VALUES FOR COMPARISON OF ACTUAL AND ESTIMATED VALUES OF THE ENDOGENEOUS VARIABLES

Variable Q2 Variable

IT .9699 EM .9956 10 .8883 EA .9333 MSG .8659 EO .9911 TTX .9625 LTOT .9876 TD .9743 NUMIG .6374 TP .9293 ALF .9337 TO .8537 MOLF .9961 R .9431 WMG .9850 g e m a .7123 WOG .7087 GEO . 7344 TPI .9746 GET .7918 TRANS .7040 D ,0664 OLY .9472 LXPM .9913 TWB .9510 EXPA .0010 DPI .9709 IMPM .9880 CM .9743 IMPA .2391 RETS .9807 BP .6417 CA .9213 GNYM .9873 CO .9870 GNYA .2672 CS .9501 GNYO .9381 PS .8060 GNY .9783 SG .9817 1UU

TABLE 4.3

RANKING BY I)2 FOR ACTUAL VERSUS ESTIMATED VALUES

(i2 Lndogene bus variables

1.0 .90 IT TTX TD TP R EXPMIKPM GNYM GNYO GNY EM EA EO ETOT ALF MOLF WMG TPI OLY TUB DPI CM RETS CA CO CS SG

.89 - .80 10 MSG TO PS

.79 - .70 GEMA GEO GET WOG TRANS

.69 - .60 BP NUMIG

.59 - .50

.49 - .40

.39 - .30

.29 - .20 I MPA CNYA

.19 - .10

.09 .00 D EXP A

SUMMARY

Z of total 0 (42) Z of total (32) 92 cndoseneou3 variables stochastic equations 1.0 .90 64.3 68.8 .89 — .80 9.5 6.3 .79 — .70 11.9 12.5 .69 — .60 4.8 3.1 .59 — .50 0.0 0.0 .49 - .40 0.0 0.0 .39 — .30 0.0 0.0 .29 — .20 4.8 6.3 .19 — .10 0.0 0.0 .09 — .00 4.8 3.1 167

Also important to the application and performance of the reduced

form is the choice of exogeneous variables because alternate values for

these variables are the basis for forecasts or simulations. In applying

the CbK to real uorld situations , at least some of the exogeneous vari­ ables must be conceptually controlable by planners. The exogeneous var­

iables were chosen so that Czechoslovak central planners could be assumed, within reason, capable of using them as policy instruments.

The possibilities for policy control of the 13 exogeneous vari­ ables vary- from flexible to rigid* The most flexible policy tool from the central planners* viewpoint are 1M and 1A. Beyond bureaucratic leth­ argy and productive capacity in the capital goods sector, investment funds can be diverted from one use to another with little difficulty. With the lagged relationship between investment and capital stock (discussed in detail in Application 1 below), additions to KM and KA via IK and 1A, re­ spectively, are well within the control capability of planners. However, changes in existing capital stock are much more difficult because, once installed, a large proportion of the capital stock is limited to a par­

ticular location (buildings) or use (equipment). Thus, assuming planners would not simply destroy or abandon capital stocks, KM and KA are most

flexible in an upward direction. Consumer prices (CPIAL, CRIFD, CPISV) can also be changed quickly by planners once the decision is made to do so. However, planners have had an ideological bias against using prices as an active policy tool. Generally, rising prices have been regarded as counterproductive to socialist welfare. A stable price level supposed­

ly safeguards consumers with relatively fixed incomes and also establishes certainty for enterprise planning decisions. Moreover, as in most lbo socialist economies, there has been considerable resistance from Czecn- oslovak workers to higher consumer prices. Consequently, the consumer price level was judged to be a policy variable of medium flexibility.^

Continuing in the direction of decreased flexibility, it was concluded that the demographic variables UPOPJ, RPOFJ and PRt-.’OM were medium to fully rigid. The planners could coerce or induce changes in the relative proportion of urban and rural dwellers (for further discus­ sion see Application 4). However, as demonstrated by the failure of the O population policies pursued in recent years to raise appreciably the growth rate of the population, the planners depend heavily on cooperation from the population to affect demographic magnitudes. Short of extrem­ ely drastic measures or improvements in housing, only long term changes in social attitudes and mores are required to change tne levels of UPOPJ and RPOPJ. While economic incentives have influenced PRWOK, quantum jumps in the participation rate of women could only be expected if the same kind of long run changes In social attitudes occur. Finally, CUEA,

DITM and T are exogeneous even to planners and are thus totally inflexible.

DUM and T are constructed from definitions which must be consistently maintained. Foreign economic activity represented in CMEA is under en­ tirely different political jurisdiction and outside of the planners* sphere of Influences.

The relative flexibilities of the exogeneous variables are not needed in Application 1, forecasting the behavior of the economy through

1980. however, the realism of Applications 2-4 which are counterfactual simulations of alternate paths the planners could have chosen, depends vitally on the flexibility accorded the planners, especially that inher­ ent in IM and 1A. luV

Application 1: Forecast of Endogeneous Variables 1973-1980

The Problem

The problem Involved in the first application is straightforward

and needs little introduction. Forecasted values for each endogeneous variable beyond the estimation period are useful for two purposes. First, once actual values for the endogeneous variables become available, the accuracy of the model as a predictive tool can be established. By com­

paring the forecasted and actual values, the forecasts of the CEH and

the underlying forecasts of the exogeneous variables can be quantitati- q vely assessed. If need be, the model can then be adjusted to provide more accurate forecasts.^

Once the model has been evaluated and necessary adjustments made, forecasts from the model are useful to planners and other government policy makers.^ Alternate future courses of the exogeneous variables, reflecting alternate courses of the economy, can be compared and evalu­ ated (e.g., see below the alternate assumptions about the growth of the other COMECON nations* CNF). Also, assumptions inherent in drafts of plans can be tested for future consistency and the possibility of real­ izing the plan goals can be examined.

In using the CEH for forecasting, it should be noted that the

CEH was specified as a historically descriptive model of the economic 12 structure and not as a short-term (one or two years) forecasting model.

Other models such as the W S 2 model [130] , specifically designed for annual forecasts, may produce more accurate annual forecasts than the

CEM. 13 However, depending on the quality of the forecasts of the exo­ geneous variables,^ the CEH is expected to forecast within a reasonable r/j

decree of accuracy over the ir.edi.uu to longer term (roughly four or uore

years). For this reason, a medium tern forecast period was chosen be­

ginning in 1973, the first year after the estimation period, to 1980,

the last year of the new Sixth Five Year Flan.

The Method

Like the problem of extrapolation discussed in Chapter II, in

forecasting the expected value of the error term of each equation is

zero.-^ In the notation above, the reduced form,

£ " 1> ^ Gz + B- ^ _u ,

combined with

L (u) - 0 becomes, for forecasting purposes,

£ “ *

Tae matrix reduced form coefficients (b“*G) is given in Table 4.1. Thus,

to forecast variables (£*) of the endogeneous variables, only forecasted values Cz*) for the exogeneous variables are needed:

“ B“*Gz* .

Because of the strictly academic nature of this application,^ only judgmental forecasts of the exogeneous variables were made. Simple, non-stochastic forecasting procedures were considered adequate. Histori­ cal trends in the exogeneous variables obtained graphically and numeri­ cally from the data were the major basis of each forecast. The forecasts of the exogeneous variables are listed in Table 4.4. The assumptions and methods used to generate these values are summarized below.

CONSTANT, DUM. _T: determined by definition. TABLE 4.4

FORECASTS OF THE EXOGENEOUS VARIABLES, 1973-1980

Exogeneous Variable______1973 1974 1975 1976 1977 1978 1979 1980

CONSTANT 11111111

CP1AL 104.365 105.409 106.463 107,528 108.603 109.689 110.786 111.894 (1967 - 100)

CPIFD 103.098 103.613 104.649 105.696 106.753 107.820 108.899 109.988 (1967 « 100)

CPISV 112.498 115.873 119.349 122.929 126.617 130.416 134.328 138.358 (1967 - 100)

CMEA - Low 822.383 870.082 920.546 973,938 1030.426 1090,191 1153.422 1220,321 High 845.702 920.124 1001.095 1089.191 1185.040 1289.324 1402.784 1526.229 (Bill, current U.S. $)

IM 41.606 43,270 45.001 46,801 48.673 50.620 52.645 54.751 (Bill. 1967 K£s.)

IA 11.373 11.828 12.302 12.794 13.305 13.838 14.391 14.967 (Bill. 1967 Kcs.)

EM 646.401 684.603 724.809 766.415 809.685 854.686 901.487 950.160 (Bill. 1967 Kcs.) TABLE 4.4 Continued

Exogeneous Variable 1973 1974 1975 1976 1977 1978 1979 1980

KA 157.082 166.531 176,536 187.472 198.845 210.673 222,975 235.769 (Bill. 1967 K£s.)

RPOPJ 5255. 5241. 5226. 5210. 5193. 5174. 5153. 5132. (Thous. persons)

UPOPJ 9327. 9448. 9571. 9693. 9816. 9937. 10057. 10177. (Thous. persons)

PRWOM 36.122 36.646 37.200 37.751 38.300 38.625 39.293 39.665 (Percent)

DUM 1 1 1 1 1 1 1 1

T 21 22 23 24 25 26 27 28 173

jCI_LAL: between lybb and 1970, Ci’XAL had a positive annual f,rovt»

rate in the r.mj;e .3 to 1,3% (except 19t»b which had a very small nega­

tive growth rate and 1909 which had a 3.432 rate), From 1971 to 1972,

Ci1AL declined and its growth rate reversed to -.32 and -.4% respectively,

ine 1971-1972 decline was smaller in magnitude than in the ciid-1950's

when CPIAL declined by 1.2 to 4,3% per year, Therefore, the downturn in

CPIAL was assumed to continue through 1973 at a mild -.Si rate and then

recover to u rate of 1,U% per year for 1974-198U. This positive rate of

inflation should, in part, account for the rising price of oil, especi­

ally from the Soviet Union, throughout the 1S70'3.

CPII'Di The same trends noted for CPIAL apply to CPIFD, In the

mid-1930's declines ranged from 2.3 to 6.4% per year and in the 1960's

increases range from .3 to 1.6% per year. The downturn in the 1971

growth rate to -.13%, continued to be relatively ctLld and stable through

1972 when CPIFD decreased again by — .13%. The growth rate for 1973 was

assured to remain -.13%, then increase to .3% in 1974 and l.U%, about

mid-range of the 1960's growth rates, in 1973. Given the present tight world grain and food supplies, a 1.0% annual growth rate in CPIFD, is

not at all unrealistic for the 1976-1980 period for an economy with con­

trolled prices.

CPISVi Similar to CPIAL, CPISV declined in the 1930's and then

grew during mid and late 1960's at the rate of 1.6 to 3.5% per year*

In 1970-1972, the growth leveled off, leading to U.0%, but not negative,

growth rates for 1971-1972. Given that Czechoslovak consumers' incomes

are rising faster than tne availability of consumer goods, consumer's

services will be in greater demand, applying upward pressure on CPISV. m

Thus, in l'J7i Cl’ISV was assumed to grow at a low 1.0/., increasing to

3.0/. per year thereafter.

IKt IM grew at very high rates lit the 1950's, up to 22.72 per

year, due to Czechoslovak, planners' decided preference for developing the

manufacturing sector, however, in the 1560*s the growth of IM slowed

and has exhibited much greater cyclical instability than in the 1950's.

In 197J-1972 the growth rate had fallen to a relatively stable 4-5%.

Given the increasing emphasis on consumers' goods by the central planners,

it is unlikely that the high growth rates of earlier years will return.

Therefore, a rather conservative growth in IM was assumed to continue at

the 1972 level of 4*.

IA: The growth of IA followed a similar pattern to that of IM—

steady growth in the 195U's then irregular cyclical swings in growth in

the 1960's, However, the levels of IA are considerably lowerthan the

levels of IM for comparable years. Therefore, the annual growth rates

for IA are higher (lower, i.e., more negative) in upswing (downswing) years than for IM. Also, the cyclical instability of IA occurred more

often and for longer duration than for IM. Because most of the cyclical

variatiou in IA is due to exogeneous factors on which little prior in­

formation is available, such as planning decisions and weather, it was

decided not to attempt to forecast cyclical behavior of IA. Instead,

the 20 year (1953-1972) average of annual growth rates, 4.0%, was assumed

to be the long run growth rate and was used to project annual levels of

IA turough 1930.

KM, KA: By definition, a relationship exists between investment

(1) and capital stock (h). The usual theoretical expression for gross investment, i.e., without depreciation, is

I = K - k(-l) = Ak or

h = u ( - l ) + I vaich assumes that investment funds are Instantaneously added to the old capital stock*

The procedure used to forecast capital stock was one which made the capital stock forecasts consistent witVi the above investment fore- casts. 18 ° Also, it accounted for the real world lag in the time necessary for investments to be completed and added to the capital stock. The same procedure was used by Flakierski [48] to analyze investment-capital relationships for the Polish economy.

The following steps were taken to forecast KM and KA. histori­ cal data for changes in the capital stock (AK) were conpared with in­ vestment data lagged various numbers of periods, e.g., I(-l), I(-2),

I(-3), I(-4). The lagged I which most closely corresponded with A K indicated the appropriate lag length. For KM and IM this was three 19 20 periods and for KA and IA it was four periods.-17 That is,

IM (-3) = AKM

IA (-4) - AKA or

KM - hM (-1) + IM (-3)

KA - KA (-1) + IA (-4) because both right-hand variables are known, these non-stocaastic rela­ tionships could be used to forecast the values of Kll and KA for 19 73-

1960. 1/u

Kl'Ol'J, UFUi’J : i oreca^u of the total population of Chechoslo­ vakia were available in ilyers [1U2], p. 463. examining tue historical percentage of total population located in urban areas (URBAN ** lil’OFJ/

(L’POPJ + RPOPJ)) over the ten year period 1963-1972, the average of an­ nual increases was .36. This small increase in URBAN levels was assumed to continue until 1980. lor example, in 1972 URBAN was 63.6% and in

1973 was projected to be 63.96/., a difference of .36/.. To project UPOPJ, the total population forecasts for each year were multiplied by the re­ spective forecasted value of URBAN. RPOPJ was forecasted as the differ­ ence between forecasted total population and forecasted UPOPJ.

PRWOM: PRWOM is defined as the ratio of the total employment of women (LWOK) to the population of working ages (UTOP); each component was forecasted separately then combined to construct forecasts of the ratio. Prom Myers [102], p. 456, forecasts of WPOP were available through 1980. Since the early 1960's the growth rate of LUOM has gradu­ ally (but with cyclical swings) declined, as larger numbers of women have become employed, to its 19 72 level of 1.62. Given the tightness of the labor market existing in Czechoslovakia and the slowed population growth, it is unlikely that large numbers of women will become employed in tne late 1970's. Thus the growth rate of EWOM was assumed to remain at its low level of 1.6k per year through 1980.

CMLA: Two alternate projections for growth in CMLA resulted in high and low forecasts of CMLA. The average of annual growth rates of

CMLA from 1954-19622^ was 11.82. For the period 1963-1972, the average of annual growth rates was 8.8k. The high projections for CMLA were based on the continuation of growth in CMLA at 8.82 rate. It should be 177

noted that over iyo3-1972, inflation was of marginal importance, if at

all, so that the annual average 8.8a nominal growth (because CMEA is

current dollars) approximates the real growth rate, however, in the raid-

1970's, inflation has increased so that the assumption of the continua­

tion of an B.8/» nominal growth rate implies lower rates of real growth.

The low projections for CMLA were based on the possibility of a

long run decline in the growth rate. Comparing the period 1954-1962

with 1963-1972, the average of annual growth rates declined 3.0a from

11.8a to 8.8^. If this trend continued, the period 1973-1980 would ex­

perience growth rates 2% less than the preceding period, or 5,8a per year. This annual percentage, 5.8a, was used to make the low forecast

of CtiEA.

Results

Forecasts for selected endogeneous variables are presented in

Table 4.5, As can be seen from Table 4.5, the two forecasts of CMEA

yield both high and low forecasts for most of the endogeneous variables.

From Table 4.1, CKEA has a negative impact on most of the endogeneous

variables. For such variables as GNY and IT (see Table 4.5), the effects

of this impact are illustrated by higher levels of growth resulting from

lower forecasted growth of CMEA. From the standpoint of LTOT, the other

variables on which CHEA has zero impact, the growth rate of CMEA makes no difference; both high and low forecasts are identical. A few sectors of the economy such as importers of manufacturing goods, represented by

IMFM on which CMEA has a positive impact, will benefit from higher growth

in CMEA. However, from the growth of the aggregate indicator GNY, the TABLE 4.5

ALTERNATE FORECASTS OF SELECTED ENDOGENEOUS VARIABLES, 1973-1960

IT GNY ETOT IMFM (Bill. 1967 K£s.) (Bill. 1967 Kcs.) (Thous . persons) (Bill. 1967 Km .) Year Low High Low High Low High Low High

1973 108.8 108.3 332.0 330.8 7256. 7256. 22.9 23.3

1974 118.1 117.1 357.1 354.4 7327. 7327. 24.4 25.2

1975 128.0 126.4 383.3 379.0 7402. 7402. 25.9 27.2

1976 138.3 136.0 410.9 404.7 7479. 7479. 27,5 29.4

1977 149.0 146.0 439.8 431.5 7557. 7557. 29.1 31.7

1978 160.3 156.3 469.9 459.2 7634. 7634. 30.8 34.1

1979 172.1 167.1 501.4 488.1 7706. 7706. 32.5 36.7

1980 184.5 178.4 534.7 518.3 7767. 7767. 34.3 39.5

Note: "Low'1 forecasts based on a 5.82 annual growth rate of CKEA. "High" forecasts based on a 8.82 annual growth rate of CHEA. 17y

CieciioslovaK economy as a whole will be better off if the other COttECON

nations1 growth follows the long, run declining trend.

Application it; The Assumption of Mo 1967 Reforms

The Problem

The high degree of importance placed on the economic reforms of

1967 by planners and the key role played by those reforms in the plan­

ners* attempt to transform the economy was discussed in Chapter I. Con­

sequently, this application is an attempt to asses the effect of these 22 reforms with the CEM. The problem may be stated as the following: In

the context of the CEM, vhat can be said about the impact of the 1967

reforms on the Czechoslovak economy? More specifically, did the reforms

move the economy in the intended direction?

The Method

The application of the CEK was straightforward in answering these

questions. The reduced form of the CEM was used to simulate the economy

as if the reforms had not occurred. The results of this counterfactual

simulation were compared with the estimated values of the endogeneous

variables calculated with the reforms in effect.

In the CEM, the exogeneous dummy variables DUM accounts for the

effects of the 1967 reforms 23 by distinguishing the pre- and post-1967

period. If no reforms had been instituted, it would not have been neces­

sary to include DUM in the CEM. For the purpose of this application,

this was interpreted by setting DUM — 0 for all years, 1953-1972. All

other exogeneous variables were not changed from their actual values.

This 13 most realistic for exogeneous variables unaffected in the short

run by the reforms such as CMEA, UPOPJ, RPOl’J. While consumer prices, 18u

CPIAL, Ci’It'D and CPISV, were affected by the price reforms, it is not

f* i at all clear what their levels could have been without the reforms,

Without an obvious alternate path for consumer prices, the actual path was judged sufficient for this application. Similarly for Investment, while the form of Investment would have differed, i.e., the central plan­ ners would have invested more and enterprises less, there would have been very little difference in the investment mix because the planners

retained control of overall investment priorities. Thus, solving the

reduced form with these values for the exogeneous variables yielded sim­ ulated values for the endogeneous variables as if no reforms had been

implemented.

Hie counterfactual simulated values were compared to the esti­ mated values of the endogeneous variables from the reduced form rather

than the actual values of the variables. The CEH reduced form equations

include an error component Inherited from the structural coefficients.

That is, the reduced form is

■ B"1 Gz + where

v » B~\i

from which estimated values are calculated,

2 _ - 3“X Gz .

The error associated with these values, evaluated in the first section

of this chapter, is A * 2L m X “ X * Simulations with the reduced form with an alternate set of exogeneous 1G1 variables zj*, i.e., with DUM - 0 for all periods, yields values

y* « Gz_* .

Thus, in order to evaluate the effects of _z*, the error inherent in the model (v) should not be included in the comparison, hither _z* must be adjusted for effect of error in the model, or, identically, the actual values must be adjusted. But the adjusted actual values - v) are simply the estimated values (£). Therefore, the comparisons in this and the following applications are based on the estimated values from 25 the reduced form.

Results

Table 4.6 lists the simulated values of selected variables. Be­ cause the actual or historical value of DUM was zero for 1953-1966, the estimated values from the reduced form were identical with the simulated values for this period. Therefore, only the simulated values which dif­ fered from the estimated values, i.e., for 1967-1972, are listed.

In light of the results from the CfcM summarized in Table 4.6, several conclusions about the 1967 reforms were drawn. First, comparing the estimated and simulated values of IT, the reforms induced 4 to 6% more investment by enterprises and the government than would have occur­ red without the reforms. Also, turnover taxes (TTX) would have been up to 50% higher and profit taxes (TP) up to 7% lower without reforms.

Thus, with the increase in wholesale prices decreasing the TTX, profits to firms were raised, as the planners had intended. Moreover, the in­ crease in discretionary funds to enterprises is reflected in the in­ crease in IT because enterprises have reinvested part of the higher profits. Also, in line with planners' goals for the reforms, government XAbLt A.6

SIMULATION UNDER THE ASSUMPTION OF NO 1967 REFORMS: SUMMARY OF SELECTED AGGREGATES3

Year IT TTX TP It GET GNY ET0T DPI S L S b SE s E S E SE SES E

1967 70.8 75.2 61.1 40.8 80.7 86.4 166.6 153.9 194.9 147.5 230.5 242.2 6669 6654 187.5 166.7

1968 73.3 77.6 61.8 41.5 83.8 89.5 171.1 158.4 199.7 152.3 237.0 248.7 6777 6761 191.1 170,3

1969 78.4 82.8 62.8 42.5 90,5 96.1 180.5 167.9 205.1 157,7 250.7 262.5 6923 6906 201.6 180.7

1970 82.8 87,2 63.9 43.6 96.1 101.7 188.5 175.9 220.0 172.6 262.5 274.3 7067 7052 206,5 187,6

1971 88.8 93.2 66.1 45.8 103.9 109.5 200.1 187.4 239.6 192.2 278.7 290.4 7139 7123 216.4 195,5

1972 95.4 99.8 68.5 48.1 112.3 117.9 212.7 200.1 260.5 213.1 296.3 308,0 7211 7195 225.9 205.0

S • simulated value, DUM * 1.0 far all years.

E ■ estimated value, DUM *1.0 for 1967-1972.

aMonetary units are bill. 1967 Res, and employment units are thous. persons. IS3

revenues (R) and expenditures (CET) were lower, by up to 8% and 23* re­

spectively, with the reforms than without them. With the reforms, the

government played a reduced role, allowing enterprises more latitude to

respond to market-type forces. In general, as suggested by the higher

aggregate indicator GNY, the economy was better off because of the re­

forms. Employment (ETOT) was not affected but consumers' disposable in­ come (DPI) was up to 12% less with the reforms In effect. The worsened position of consumers' DPI was partly the result of increased direct, i.e., income, taxes, and partly the result of decreased total personal income.

The effect of decreased DPI on consumption was mixed. While consumption expenditures on manufactured goods (CM) increased 11-13%, those on agri­ cultural goods (CA) and other goods and services (CO) declined up to

14% and 1% respectively. Referring to the structural equations, these results for consumption were the expected ones: DPI is Inversely re­ lated to CM and directly to CA and CO.

In summary, the analysis of the results of the CEM simulation are consistent with the analysis proposed by Czechoslovak planners. The economy from the viewpoints of both the planners and the CEM moved in the directions intended as a result of the reforms.

Application 3: The Effect of Lowered Levels of Manufacturing Investment

Ttie Problem 26 The rigorous adherence to a Marxist-socialist development scheme by Czechoslovak central planners uas lead to a high priority for manu­ facturing investment (IM). Historically, the emphasis of the heavy man­ ufacturing branches has been at the expense of the agricultural and other branches. The results of these investment priorities and policies 1G4 has included poor performance by the agricultural sector and United levels of goods available to consumers. Given the benefit of such hind­ sight, the counterfactual question nay be posed: What would the effect of decreased emphasis on IM have been on the Czechoslovak economy if the emphasis on agricultural investment (IA) had been increased. Or, could similar development of the economy have occurred with a less restrictive 2 7 investment mix?

The Method

Rather than arbitrarily assigning a change in the investment mix, specific features of French investment by branch was chosen as an alter­ nate to Czechoslovakia's. Several reasons led to this choice. The

Freuch economy is similar in industrial composition and state of devel­ opment to the Czechoslovak economy. Moreover, Czechoslovak economists compare their own economy with the French economy.France2ft has had a record of national planning in a market context and thus provides an interesting foil to the socialist, centrally directed planning of Czech­ oslovakia. While the choice of France adds more realism to the solution

(i.e., another economy under similar conditions actually decided upon and implemented the alternate investment mix), there was no necessity that France be utilized as the counterexample. Any other economy could have been chosen; the methods described below would have been identical, but the results would have been different*

A comparison of French and Czechoslovak manufacturing investment is presented in Table 4.7. From the two columns listing the share of manufacturing investment of the total, it can be seen that the French proportion (FM/FT) is lower for all years by 2-10% than the Czechoslovak Ii5

TABLE 4.7

COMPARISON OF CZECHOSLOVAK (Cz.) AND FRENCH (Fr.) MANUFACTURING* INVESTMENT

IT: Cz. IM: Cz. Total In­ Mfg. In- FT: Fr. Total FM: Fr. Mfg. vestment ves tment Investment Investment Bill. 1967 Bill. 1967 IM/IT Bill. Curr. Bill. Curr. FM/FT Year Kca, KCs. X Francs Francs X

1956 34.289 12.868 37.5 33.76 11.97 35.5 1957 37.457 14.643 39.0 40.34 14.83 36.8 1958 42.214 17.960 42.5 45.75 16.79 36.7 1959 50.553 21.743 43.0 55.38 21.09 38.1 1960 56.626 24.555 43.4 61.00 23.17 38.0 1961 60.519 26.400 43.6 70.67 27.28 38.6 1962 58.803 27.214 46.3 79.94 30.86 38.6 1963 52.252 24.214 46.3 91.61 34.21 37.3 1964 58.162 26.665 45.8 108.57 38.06 35.1 1965 62.595 28.559 45.6 119.68 39.99 33.4 1966 68.610 32.168 46.9 132.40 44.31 33.5 1967 70.446 30.701 43.6 144.12 47.03 32.6 1968 76.207 30.260 39.7 156.96 48.84 31.1 1969 83.573 34.860 41.7 183.20 57.30 31.3 1970 88.475 36.798 41.6 208.00 70.50 33.9 1971 93.484 38.402 41.1 231.40 79.10 34.2 1972 101.641 40.006 39.4 259.50 87.60 33.8

Sources: Czechoslovak data: CEDB (see Appendices A and b), French data: (1956-1959) National Accounts of OECD Countries 1953-1969; (1960- 1968) National Accounts of OECD Countries 1960-1970: (1969-1972) Yeat^ book of National Account Statistics 1973 Vol.1 (U.N. Statistical Office, N.Y.: 1975).

a"Manufacturing Includes manufacturing, construction, mining, electricity, gas and water* 186

proportion (IM/IT). This indicated a larger share of investment was

allocated to agricultural and other branches in France than in Czech- 29 oslovakia. In calculating the French proportions, it should be noted

that current franc data was used. The constant 1963 franc data avail­

able in OECD and CK sources did not cover as long a time period, 1959-

1972 compared with 195o-l972 for current data. In order to extend the

analysis for as long a period as possible, current data was chosen.

Thus, implicitly the assumption was made that ratio of the two current

series cancelled any price distortions, resulting in a comparable pro­

portion to the Czechoslovak, proportion based on constant data.

The French share of manufacturing investment was imposed on the

Czechoslovak, total to calculate an alternate level of manufacturing in­

vestment (CZFRIM). Tills is shown in Table 4.8. In order to analyze the effect of a less restrictive agricultural investment policy, the dif­

ference (DIFF) between the historical Czechoslovak investment in manu­

facturing and the alternate (i.e., DIFF » IK - CZFRIM) was allocated to

agriculture. Thus an alternate level of agricultural investment (CZFRIA) was calculated as the sum of the historical agricultural investment (IA) and DIFF.

Table 4.8 also presents alternate capital stock estimates con­

structed from the alternate investment estimates by the same procedure

discussed in Application 1, Because there is a four period lag for ag­

ricultural investment to become part of the capital stock, the earliest period of all variables was limited to 1960. Beyond the need for con­

sistency between investment and capital stock, alternate capital stock estimates were required to link changes in agricultural investment to 187

TABLE 4.6

CZECHOSLOVAK INVESTMENTS AND CAPITAL STOCK WITH THE FRENCH PROPORTION IMPOSED3

Year CZFRIM DIFF CZFRIACZFRKM CZFRKA

1960 21.51 3.05 12.61 340.69 84.73 1961 23.36 3.04 13.24 356.18 91.41 1962 22.70 4.51 13.40 375.43 100.92 1963 19.51 4.70 12.31 396.94 112.07 1964 20.39 6.28 14.72 420.30 124.68 1965 20.92 7.64 16.39 443.00 137.93 1966 22.96 9.21 18.47 462.51 151.33 1967 22.99 7.71 15.44 482.90 163.64 1968 23.71 6.55 16.37 503.82 178.34 1969 26.14 8.72 18.67 526.78 194.75 1970 29.99 6.81 16.26 549.77 213.22 1971 31.96 6.45 16.45 573.48 228.66 1972 34.31 5.69 16.63 599.62 245.03

aAll units are bill. 1967 Kt£s.

K e y I m CZFRIM * IT x ■— (See Table 4.7 also)

DIFF - IM - CZFRIM (See Table 4.7 also)

CZFRIA - IA + DIFF

CZFRKM “ capital stock in manufacturing created with CZFRIM (-3).

CZFRKA " capital stock in agriculture created with CZFRIA (-4). Ib8 agricultural production (CNYA). Keferring to Table 4.1, the matrix of reduced form coefficients, it can be seen that IA has no impact on GNY A because its coefficient is zero* On the other hand, the impact multi­ plier for IM is .037. Thus, if IM was reduced and IA increased, as pro­ posed above, the net effect on GNYA without a linkage to KA would be negative. However, the Impact multiplier of KA on GNYA is .180 and, even with the lagged response of KA to changes in IA, offsets the multiplier for Itt. 31 Therefore, the alternate estimates of capital stock in manu­ facturing (CZFRKM) and in agriculture (CZFRKA) were used In the counter- factual simulation with CZFRIM and CZFRIA.

Results

The results of the simulation are summarized in Table 4.9 for selected major aggregates in the CEM and are compared with the histori­ cal estimates. It can be seen that the simulated value of IT differs from the estimated value by -4 to +6 percent. The reduced form (Table

4.1) indicates that IA has no impact on IT and KA has only a small int- pact compared to IM and KM. Thus, the effects of IM and KM dominated up to 1963 when the Impact of increased KA, combined with the other ex­ ogeneous variables dominated the behavior of IT.

The effect of changed investment priorities leads to the expected results in the production sector. Manufacturing production (CNYM) was simulated as 1 to 7 percent less than the historically estimated values.

GNYA was increased by up to 59X, an enormous Improvement considering the performance of Czechoslovak agriculture in the past. The net effect on

GNY in the early 1960's was a 1 to 5% decline, due to large declines in other production (GNYC& during this period. However, those declines 16b

TALLE 4.9

SIMULATION WITU THE FRENCH PROPORTION IMPOSED: SUMMARY OF SELECTED AGGREGATES3

Year IT GNYA GNY ETOT DPI S E S E S E S E S E

1960 47.2 49.2 23.0 22.8 167.4 172.8 6029 6049 139.4 143.9

1961 49.8 52.9 25.6 25.5 174.4 182.6 6208 6229 147.7 153,0

1962 52.9 56.2 26.2 25.2 182.5 191.3 6249 6279 152.0 159.1

1963 55.9 58.3 26.8 24.3 190.7 197.1 6266 6297 153.9 160.9

1964 60.9 63.5 28.3 24.6 203.9 210.8 6361 6403 160.6 169.6

1965 65.4 66.1 31.2 26.0 216.1 218.0 6474 6526 168.4 177.7

1966 69.7 69.4 32.2 24.9 227.4 226.7 6550 6612 174.8 185,3

1967 77.4 75.2 32.5 24.1 248.1 242.2 6602 6654 158.7 166.7

1968 80.8 77.6 35.1 24.9 257.2 248.7 6717 6761 163.7 170.3

1969 85.8 82.8 38.1 25.9 270.5 262.5 6849 6908 171.3 180.7

1970 89.7 87.2 42.8 28.5 281.0 274.3 7006 7052 179.0 187.6

1971 94.7 93.2 44.4 28.6 294.4 209.4 7080 7123 186.0 195.5

1972 101.0 99.8 46.8 29.4 311.2 308.0 7157 7195 195.5 205.0

S *• simulated value (see text for assunptions) *

E ** estimated value (from the reduced form with actual data).

Monetary units are bill* 1967 K?s, and employment units are thous. persons. lvO bccare staller in the late lJbO's and the Increases simulated for G..YA uoiir.ated causing simulated GhY to surpass the historical values.

As far as vorkers would be concerned, total employment (LiOX) simulated under the alternate investment strategy vas less than one per­ cent lower than tue historical level. This negligible arount is attri­ butable to the single impact of IM on LTOT. XAt id! and LA have zero im­ pact multipliers for LIOT. Also of interest to workers, disposable per­ sonal income (LiI) would have decreased by 3 to 3/. inducing higner CM and lower CO and CA. The decline in CA with an increase in GhYA was paradoxical because increased production should have resulted in in­ creased availability to consumers. Moreover, according to the Cbi-i, the increased production was not exported; the simulated values of agricul­ tural exports were identical with the estimated values. This paradox was explained by the impact multipliers for CA— KA has zero impact on CA and i:i a direct impact, leading to the decline in CA. However, the de­ cline in bPl and consumption would have been offset in the late 1960*s by a 1-3/i increase in communal consumption (CS).

In summary, an alternative investment mix favoring agriculture as suggested by the French economy could have increased GAYA and GhY by the early 197u*s. These increases could have been effected with uearly negligible displacement of employed workers and with low cost to con­ sumers. Losses of private consumption would have been offset by gains in communal consumption. 191

Application 4: A Change in Population Location

The Problun

The extent of commuting and commuting patterns have been studied extensively by Czecn and blovak geographers.-^ DeLiek and btrfda have concluded that

"corii,luting in Czechoslovakia reaches an extraordinarily high level. One half of the employed Ken and almost one third of women have their workplaces in another community than in that they live, {emphasis added] the urban concentrations being overlooked. About 2,300,000 people commute to work in Czechoslovakia, transport by train over an average distance of Id kilometers, by bus over 10 kilometers. Commutors account for 34 percent of all persons transported by train and for 44 percent of all persons transported by cars, motorcoaches and buses. Commuting is higher in Slovakia and in South Moravia than in the Western parts of the country.

The amount of commuting is far greater than the amount of migration as a source of potential addition to the labor supply. For example, in

1961 about 63,000 persons migrated to urban areas in all of Czechoslo­ vakia. i.ovever, about 424,000 persons commuted to their jobs in Slovakia 34 alone. Unfortunately, no time series data on commuting are available and migration must serve as the sole measure of potential labor trans­ fer.

In Czechoslovakia, commuting, involving no permanent change in residence, often must substitute for migration. Two Interrelated factors are responsible for the large amount of commuting required. First, tnere is a geographic discrepancy between the location of jobs and the loca­ tion of the population. For example, "in 1961 [in towns] lived 29.7k of inhabitants {of blovakia] but there were concentrated here 63.4^ of job opportunities of industry and tertiary sector of Slovakia. From the whole number of commuters [about 7 0 0 , 0 0 0 ] 0 3 * 2 % are commuting to towns." I '■Jl

Second, the investment policies of the planners have not favored

coast ruction of nonproductive new housing or rehabilitation of old housing. Moreover, available construction materials nave been directed

to and absorbed by enterprises to increase their productive capacity.

The result of these policies has been a severe housing shortage even for tnose already living in urban areas. Therefore, even if a rural inhab­ itant wanted to move closer to his job, he could not find suitable nous­ ing. however, the Czechoslovak transportation system was already in ex­ istence and was serving a productive purpose, transporting intermediate and final goods. The planners have found it less expensive to develop public transportation, mainly bus service,^ than to invest in housing.

Part of the cost of alternative housing has been passed to workers in the form of commuting costs. The extent to which commuters would prefer to be migrants is not clear, thereby distorting migration relationship.

For this application of the CEM, then, the problem was formu­ lated in the framework of a Tinbergen-type analysis. A one percent shift in the rural population (RFOPJ) to urban areas was proposed to be in­ duced by targeted increases in infrastructural investment in housing and other public services. This type of Investment is, by definition, in­ cluded in other investment (10). Also, the rural population shift was subject to the constraint (target) of not changing total employment levels, i.e., not increasing unemployment. These two targets were to be met with the levels of investment in manufacturing and agriculture as policy tools. iy3

Tne Method

Target values were determined by neans of various assumptions

and calculations. Decause no change from actual LXQT levels was required,

LTOT target values were identical with the historical data. The determ­

ination of target levels of 10 was more complex. First, KFOPJ was de­

creased by one percent to derive the alternate estimate of RPOFJ (ARPOPJ).

The one percent decrease was then added to the urban population (UPOPJ)

to establish the alternate UFOPJ (AUPOPJ). In order to determine the

amount of 10 necessary to support the increase in UPOPJ, the one percent

decrease (*» AUPOPJ - UPOPJ) was multiplied by the impact multiplier from

Table 1 o f UPOPJ on 10, .00654, The target values for 10 were calcu­

lated as the actual level of 10 plus the additional 10 required to sup­

port the increase in UPOPJ. The assigned levels of APTOPJ, AUPOPJ and

targeted 10 are listed in Table 4,10. The actual (identical to the tar­

get) value of ETOT is listed in the C£Db.

Several assumptions were made to facilitate both the above cal­ culations and the entire application. No lagged adjustments were per­ mitted, It was assumed that funds invested for nousing and other public services Instantaneously were transformed into capital stock, I.e., actual buildings, water and sewerage facilities, etc. That is, because the

CUM had no variable for other capital stock, 10 served as a reasonable

proxy for the additions to the capital stock. Also, it was assumed that

given an instantaneous increase in 10, the inducement of available hous­

ing and lower commuting costs would cause an instantaneous shift in pop­

ulation from rural to urban areas. Further, in general the portion of

commuters to urban industrial jobs from rural residences was assumed to TABLE A.10

ALTERNATE POPULATION ESTIMATES AND REQUIRED TARGET VALUES FOR INFRASTRUCTURAL INVESTMENT* (TIO)

Year ARPOPJ RPOPJ AUPOPJ UPOPJ TIO 10

1953 5993. 6054. 6827. 6766. 14.807 14.290 1954 5964. 6024. 6988. 6928. 14.505 13.991 1953 6054. 6115. 7039. 6978. 15.590 15.068 1956 5903. 5968. 7321. 7261 16.452 15.942 1957 5878. 5937. 7480. 7421. 17.522 17.015 1958 5844. 5903. 7630. 7571. 17.715 17.211 1959 5804. 5862. 7762. 7703. 20.644 20.143 1960 5865. 5924. 7789. 7730. 23.013 22.507 1961 5731. 5789. 8049. 7991. 24.409 23.915 1962 5687. 5745. 8173. 8115. 23.196 22.705 1963 5647. 5704. 6305. 8248. 20.917 20.430 1964 5610. 5667. 8448. 8391. 23.533 23.049 1965 5502. 5557. 8657. 6602. 25.763 25.288 1966 5499. 5555. 8741. 8685. 27.651 27.177 1967 5453. 5508. 6852. 8797. 32.486 32.016 1968 5410. 5465. 8951. 8896. 36.596 36.129 1969 5365. 5419. 9050. 8996. 39.222 38.759 1970 5291. 5344. 9043. 8990. 42.684 42.228 1971 5277. 5330. 9130. 9077. 45.532 45.077 1972 5218. 5271. 9263. 9210. 51.149 50.699

aMonetary unita are bill. 1967 K£s. and demographic units thous. pe rs ons. 195 bt: significantly large. lor, tf most commuting was by urban residents

to urban jobs, then the entire Application is of only trivial signifi­

cance. Finally, the values of exogoneou3 capital stocks, hM and KA, for

tuis policy simulation were assumed to be identical with their Histori­

cal values, aeitner capital stock was adjusted to compensate for changes

from the actual investment level. lo do so would have required the sol­ ution of third and fourth-order difference equations, specifically equa­ tions (5-2) or (5-4) and (5-5) , below.

The instruments, lit and IA, were related to the targets, LTOT and 10, by manipulation of the reduced form. Given the reduced form

X “ + — where

P - ii“XG and j r -

then P and z were partitioned by instruments (i) and targets (T)

,iT i-.l j: T (5-1) pi* p.* z*

The asterisk, *, denotes endogeneous variables other than the targets and the dot, ., denotes exogeneous variables other than the instruments. because tive number of targets must equal the number of instruments, the

1 ^ matrix was square. Thus, assuming t(v) “ ^>, the instruments ( z ^ ) T could be solved simultaneously in terms of the targets (j£ ) :

£ - riT z1 + p*t z * (5-2)

z1 - (P11)”1^ 1 - P*1 z-) (5-3)

The effect on the rest of the economy of achieving the targets by setting the policy instruments at values z* also was determined. Values for all lyo otaer endogeneous variables were simulated by the same procedure used in previous Applications: the alternate set of values for exogeneous vari­ ables was used to solve the reduced form.

The Results

Equation (5-2) was interpreted in terms of the reduced form of tue CEH as follows:

10 - A - .56425 IK - 1.0 IA (5-4)

ETOT - b + b.72567 IM - 0.0 IA (5-5) where A and B * constant term + values of other exogeneous variables multiplied by their respective coefficients.

Thus, equation (5-5) was solved for control values of IM given the target values of LTOT. the shift in rural to urban population and the historical values of all other exogeneous variables. Then (5-4) was solved for control values of IA given control values of IM. target values of 10. the shift in rural to urban population and the historical values 35 of all other exogeneous variables. The control and actual values of

IK and IA are presented In Table 4.11. As is evident from the control values of IK. to achieve a stable ETOT (discussed further below). a small decrease in IK would have been necessary for most years (except 1954.

1957. 1958). The effect of "extra" (i.e.. actual greater than the con­ trol) funds from IN and the population shift required an increase in IA to increase 10 by the desired magnitude. 10 would have increased beyond the desired level if IA had not increased. In those years which the con­ trol values of IM was greater than the actual value, the effect of the population shift on 10 was more than enough to offset the added funds 137

TABLE 4.11

CONTROL VALUES OF THE POLICY INSTRUMENTS (bill. 1967 K£s.)

IM: Investment IA: Investment in Manufacturing in Agriculture Year Control Actual Control Actual

1954 12.99 10.99 5.11 3.25 1955 3.47 11.02 9.84 4.29 1956 11.55 12.87 5.70 5.48 1957 15.30 14.64 4.37 5.80 1958 19.74 17.96 3.49 7.04 1959 17.54 21.74 5.11 8.67 1960 19.61 24.56 4.23 9.56 1961 9.20 26.40 11.59 10.20 1962 17.59 27.21 10.97 8.88 1963 19.57 24.21 15.58 7.61 1964 15.65 26.67 19.24 6.45 1965 14,80 28.56 19.36 8.75 1966 25.04 32.19 13.37 9.27 1967 28.97 30.70 12.77 7.73 1968 28.68 30.26 11.46 9.82 1969 30,10 34.86 11.18 9.95 1970 27.69 36.80 12.64 9.45 1971 30.86 38.40 13.32 10.01 1972 31.31 40.01 13.35 10.94 lys required for If 1. This is seen in that, for those years, IA had to be

Increased to keep 10 on target*

The effect on the rest of the economy of the population shift and maintaining the control levels of IM and IA is summarized for selec­ ted aggregate variables in Table A.12. Although LTOT remained constant, the relative distribution of employment among branches changed. From

Table A.12, manufacturing employment (EM) declined by up to 3* and agri­ cultural employment (EA) Increased by up to 3%. From the reduced form

(Table A.l), the decreases in IM and RPOPJ dominated the behavior of EM.

On the other hand, the (inverse) impact of KPOPJ on EA, Indicating hid­ den under- or unemployment in agriculture, dominated the effects of de­ creased IM and increased UPOPJ. Thus, these results Indicated that, if the proposed policies had been implemented, agricultural workers would have benefited the most. The results of applying the CEM suggest that the manufacturing workers supposed to benefit by decreased commuting costs would have benefited the least because of decreased employment.

Furthermore, from comparison of the simulated major indicators total investment (IT), net material product (GNY) and disposable per­ sonal income (DPI) with their estimated values, the economy, in partic­ ular consumers, would have been in a worse position with one percent of the rural population shifted to urban areas, both IT and GNY would have been up to 11/. lower and DPI up to 14% lower had the population shifted and investment policy emphasizing 10 been pursued. Thus, from the sim­ ulation the economy would not have benefited from such a shift in popu­ lation location and investment priorities as proposed in this Applies-

• 5 -j tion. From the planners' viewpoint, investment in commuting services TABU 4.12

SIMULATION OF THE POPULATION SHIFT WITH CONTROLLED IM AND IAj SUMMARY OF SELECTED AGGREGATES

IT GNY EM EA EO DPI (bill. 1967 (bill. 1967 (Thous. (Thous. (Thous. (bill. 1967 If ear K&.) K2a.) persons) persons) persons) Kcs.) s E S E S E s E S ES E

1954 32.6 32.0 128.2 126.6 2313 2312 2095 2026 1443 1452 106.8 103.2 1955 28.9 32.5 118.3 127.9 2301 2359 2010 1956 1645 1643 94.0 102.4 1956 33.7 34.5 131.1 133.4 2408 2427 2007 1944 1632 1638 111.2 111.8 1957 37.2 37.2 140.5 140.4 2494 2501 1926 1860 1680 1687 120.3 118.4 1956 40.9 40.4 150,5 149.2 2590 2591 1822 1755 1700 1709 130.5 127.2 1959 43.3 45.4 156.8 162.4 2646 2683 1704 1647 1709 1710 133.5 137. B 1960 46.8 49.3 166,3 172.8 2727 2769 1554 1497 1782 1784 138.7 143.9 1961 45.2 52,9 161.9 182.6 2696 2813 1600 1564 1863 1851 132.2 153.0 1962 51.7 56.2 179.4 191.3 2801 2871 1558 1510 1902 1898 147.9 159.1 1963 56.0 58.3 191.0 197.1 2868 2908 1496 1441 1947 1949 156,0 160.9 1964 58.4 63.5 197.3 210.8 2893 2972 1452 1407 2030 2024 156.7 169.6 1965 59.9 66.2 201.3 218,0 2929 3024 1468 1429 2081 2072 161.2 177.7 1966 66.0 69.4 217.7 226.7 3044 3098 1416 1367 2149 2147 177.3 185.3 1967 74.2 75.2 240.0 242.2 3117 3138 1333 1276 2236 2241 165.4 166.7 1968 76.7 77.7 246.2 248.7 3152 3173 1324 1268 2317 2321 169.2 170.3 1969 80.5 82.8 256.3 262.5 3197 3237 1325 1273 2397 2397 175.6 180.7 1970 83.0 87,2 263.0 274.3 3194 3261 1380 1337 2457 2454 177.0 187.6 1971 89.7 93.2 281.0 290.4 3264 3321 1325 1279 2526 2524 186.9 195.5 1972 95.8 99.8 297.3 308,0 3314 3378 1291 1248 2573 2570 195.0 205.0

sC Ml 2 JO rather tnan Housing lowered the coat of industrialization, uowever, from conauiers' standpoint, GwV is not a particularly good indicator of consumer welfare to the extent that neituer nonproductive puulic trans­ portation nor housing services are included in net material product. A shift in population location with nore housing would nave increased the understatement of consumer welfare. Moreover, commuting costs which are privately borne would nave been lower, also increasing consumer' welfare.

Therefore, the net effect on consumers of a shift in residence is not clear; consumers most likely would have been willing to trade lower in­ come for more housing. 1 See Chapter TIT f o r a discussion of this characteristic o f

the Cm.

2 Theil [131] » P* 465.

3 ‘This section focuses on the reduced form and specific equa­

tions. Specific coefficients or impact m ultipliers are dis­

cussed as needed in the applications in the following sec­

t i o n s .

4 For example and further discussion see Glickman |_54) P* 1 6 4 ,

or Christ [_3l] » Section IV.

5 The Q“ measure is similar to the correlation coefficient.

LfEsperance, et. a l.f [9l] also use this measure to evaluate

the Ohio Econometric Kodel. 2 6 The Q measure was used in order to obtain a quantifiable

basis of comparison over the entire sample period. For com­

parison of individual periods between estimated and actual

values, a graphical approach is helpful to evaluate, e.g.,

model performance at turning points. If the CEM is used at

some future time for extensive short-term forecasting, key

variables w ill be evaluated graphically.

7 Furthermore, from Table 4.1, it is seen that consumer prices

have zero impact on most endogeneou3 variables. Thus, in

the C.TI changes in these prices would have only marginal ef­

fects on the economy as a whole.

201 202

0 Basically there policies have consisted of subsidies and tax

reductions for child-rnloted expanses, bee for example,

Population Policy in CzechoSlovakia [ 111i especially pp. 57-68.

? At this time statistical yearbooks for the forece.cted years are ft not available. Until this data becomes available, the C?Ji

forecasting1 record cannot be evaluated quantitatively. How­

ever, the resulting forecasts presented in this section were

qualitatively evaluated for their reasonableness, given ex­

pected economic trends. That is, the forecasts made with the

CdK were compared to judgemental estimates of trends in en­

dogenous variables,

10 See Glickman [54]* P. 170, and Evans, et. al., [43] •

11 For discussion of the uses of econometric methods in socialist

policy-making see Brada and King [24]» Gujan [127], Klein [79] t

hujan and Kolek [1291 and Shapiro and Halabuk [1173*

12 Gee Brada and King [24]* PP* 7-9*

15 See Chapter III, Evaluation of the Structural Equation Esti-

m& t g g *

14 Th't is, errors in forecasting the exogeneous variables,

rather than the CEti, are the main source of forecast error.

See Glickman, [54 J» P* 167, for a review of the discussion of

the sources of forecast error.

15 See Theil [13X1 or Glickman L54]»

16 That is, the results of this forecast were not used to make

any policies or evaluate real economic decisions. The real

world costs associated with a "wrong" forecast were very 205

clone to zero.

17 In defending the use or" Polinh gross caoita.1 data, llakierski

g ilj, p. 6, argues that ‘"or centrally planned economies the

gross investment concept, rather than net, is the proper one

to consider:

"... in a country where the amortization fund is in central disposition, and where, due to fast rate of growth of the capital stock, only a fraction— and very often a small one— of the amortization fund is used for real replacement of the old capital stock, leaving a substantial part of this fund for creating nev expanding production capacities, a gross con­ cept better reflect the link between the capital input and the output."

Then he discusses the pragmatic grounds for the use of gross

capital data, that depreciation data are not reliable. For

these sane reasons, for the nurposes of this forecast of

Czechoslovak data only gross capital will be considered,

IS Rote that capital forecasts = f (investment forecasts) and

not vice versa. One of the two must be forecasted and the

other made consistent with it. It was decided to forecast in­

vestment than capital stocks because Hi and IA have a greater

impact in the reduced form than do Hi and KA. Also, because

the method discussed below is only an approximation it was

judged to be less accurate than a straight forward extrapola­

tion. Thus, some accuracy in capital forecasts has been trad­

ed for consistency with investment forecasts,

19 Actually KA corresponds equally well with IA (-5) and IA (-5)»

based on the number of years with the closest values for each

lag. Therefore, the four period lag was assumed as a comsromi se between the two 1--.; lon;-ths. riir.il nr ly, XK cor­

responded. equally wol 1 ' ri t h IF (-2) ?.tv III (-4) which lead to

the la/; length of three,

20 There is at most a strong correlation be tv;sen, e.g. , IM (-3)

and KE’j. however, for the purpose of forecasting KK, use of

the "=" is a low cost solution,

21 A growth rate for 1953 was not calculated between CKZA d a ta

for 1552 was not available in the CEDB.

22 Im plicitly the performance of the CHM in producing plausible

simulations was also simultanelusly tested,

23 However, DUM also includes the effect or changing price base—

years to 19^7. Insofar as those data transformations or chan­

ges were not the result of price reforms in 1967, some non-re­

form effects of sta tistica l manipulations are captured by DUE.

In the analysis which follows, it was assumed that the effects

of these effects are negligible,

24 One possibility would be to examine the trend from the I 96O-

1967 data and extrapolate this trend through 1972,

25 L'Espcranee, et. a l,, |_91j , pp. 790-799, fooLnote 12, also

follow this approach,

26 For an example of a r.cdel of one such scheme, see Domar [ 40J

or the earlier work on a sim ilar model by Kahalanobis (_95l

and Bronfenbrenner l25 !. The model developed required large

investments in productive (mainly manufacturing) industries at

the in itia l stages in order to realize high non-productive

consumption levels at some future time. 205 ?'/ Those quest Lons have important welfare im l icat ions for con-

suT.m'", sspecially if eonsuners could have bean better off

under a d i f forer.t set of investment p rio ritie s. Welfare issues

of this kind have been analysed for the Soviet Union, for ex—

a mule see Hunter [ 7 4 However, rcco/mixing the sensitivity

of such analyr.ee to a particular ret of count^rfactual assump­

tions, in this application value judgements ’■/ill not be made.

20 For example, nee Barta and S tille r [_11 ] , or Strup |_1?6],

29 It should be noted however, that the share of TYench investment

in agriculture was (based on data from, the sane sources as

fa.ble 4.6) about 6 percent lower than Czechoslovakia's. This

indicated a. much larger share of investment in French service-

related (i.e ., other non-manufacturing, nonapricultural)

branches. The analysis cronosed in this application could be

done for manufacturing and services, rather than manufacturing

and aapiculture, However, other investment (io) is an endog—

eneous variable and would require a Tinbergen-type analysis,

assigning 10 a target value to be achieved by the tool of IN.

This particular problem is explored in Application 4.

30 The analysis included calculation of capital stocks requiring

truncation of the investment series discussed below,

31 Unfortunately, no linkage exists between either IA or KA and

CA. Only IK and UK have non-nemligiblc impacts on CA. Thus,

the result of the simulation expected and obtained was a de­

cline in CA with the decline in lit and KK.

32 See l'or example UaSovsky (_12 j, Hanpl [64 [ and Hurvpl and Uuhnl . i'5 , DemeV. a. ml t riria ( 37 .

33 Terv.k <:r. ’ . r M • • L 57 , p» 202. Ur fortniuiely, they ;o no t 1-

d oat if:/ t ■ -r? h ie of these- fi ;nirec. Presumably t from other

dates river j.i; the chur/er, the time period is tar nid-to-late

IS^O's.

34 Pasovsky l_12^ , p. 50.

55 0^ course, the identical noultion to (5-4) S-nd (5“5) could be

found by solving the two equations simultaneously. However,

the zero coefficient for IA in (5-5) simplifies the solution*

36 The year 1933 was omitted because the value of IK was negative

for that year.

37 Of course, it the problem, is reformulated to hold il’ constant

rather than HfOi?, different results are possible. CONCLUSION

Nummary

I i i tuls study an econometric model of the centrally planned

socialist economy of Czechoslovakia nas been specified, estimated, eval­

uated and applied to several empirical problems. Realizing that the

quality of parameter estimates of the Czechoslovak Lconometric Model

(CLM) depends in part on the quality of the underlying data, a substan­

tial portion of this study was devoted to compiling the Czechoslovak economic Data base (CLUB)* Data for the period 1933-1972 included in

the CLDii was collected from many diverse sources, e.g., statistical year­ books, journal articles and publications of the Czechoslovak government, of the United States government and of the United Nations. The primary data source was the official Statisticka roSenka: SSSR (Statistical

Yearbook: Czechoslovakia) ; from annual issues of this statistical hand­ book most time series were constructed. Raw data was cross-checked using several sources whenever possible. After a reasonable search for missing data, any incomplete portions of time series were estimated ecouometrically by the technique developed by Chow and Lin. Incomplete

series were related to similar complete ones via the ordinary least

squares estimator. Then the complete series were adjusted and/or trans­

formed into the format required for the estimation of individual equa­

tions. Finally, for future use, the data was organized and computerized

systematically as the CLDB.

20 7 2u6

The it.itial specifications of the equations of the CEM were based on the benavior of specific Czechoslovak institutions and the socialist economic structure. 1‘reliLiinary ordinary least squares esti­ mates of the parameters of these equations led to modifications in the equations, particularly when the coefficients of some variables were shown to be statistically insignificant. Choices among alternate sped-

—2 ficatlous vere made on the basis of R and the standard error of the re­ gression, a transformation of the mean squared error. From the final specifications of the CEM presented herein, the identification of each equation was determined and on this basis the appropriate estimator chosen. All the equations were found to be Just-identified or over­ identified, requiring the use of the ordinary least squares estimator or the two stage least squares estimator, respectively. The individual structural equations of the CEM were estimated for the period 1953-1972 — 2 and were evaluated on the basis of their R and Durbin Watson statistics,

^o autocorrelation for the thirty-two stochastic equations was defini­ tively ascertained at the one percent level of significance.

Characteristics of the CEM were compared with those of selected current econometric models of U.S. regions and the Czechoslovak econo- omy. With respect to these existing models, the CEM was found to be medium-sized in terms of the number of equations and observations. The

CEM contaiued a smaller proportion of both bivariate specifications and equations with lags than most models. The former proportion was judged to be a positive characteristic of the CEM but the latter was not; the need for further investigation of the lag structure is discussed below.

On the basis of the proportion of equations with R i *9U, the CEM was 2 0 lJ

considered to be the equal of post rodels. The overly large proportion

of equations in the CL.', with < ,70 was attributed to the instability

of the agricultural sector due to exogeneous factors. The major differ­ ences between the CLH and the two existing Czechoslovak nodeIs were ex­

plained by differing objectives of the authors: the VVS1 and VV'JZ models were constructed, in effect, to maximize K“ and thereby their short run

forecasting ability whereas the CLM was constructed to capture long run structural characteristics of the economy.

The matrix of structural coefficient estimates was transformed algebraically to a matrix of reduced form coefficients. With the reduced form equations and tne actual values of the exogeneous variables, time series were calculated for each endogeneous variable. To evaluate the ability of the reduced form equations to reproduce actual economic be­ havior the calculated values were compared with the actual values by means of the measure* The ordinal ranking of endogeneous variables by was found to be similar to the ranking of structural equations — 2 for endogeneous variables by R . As expected the goodness of fit for both structural and reduced form equations was poorest for agriculture- related variables and best for, e.g., investment, national Income, em­ ployment, labor force and consumption.

In order to demonstrate the usefulness of the CLK, the reduced form was applied to solve four different problems. The first problem was to forecast values for all the endogeneous variables through 19bJ, the last year of the current Sixth live Year Plan. Judgmental fore­ casts of the exogeneous variables were made and combined with the re­ duced form. Forecasts of selected endogeneous variables were presented ziu

iu Table 4.o; for example, net material product wat> forecasted to grow

by 2b-b0 percent over the jixtu Five Year Tlau.

The second problem was to assess tne effect of the lyc7 reforms

on the economy, by setting the outmy variable for 1907-1972 (DUM) e^ual

to zero, the endogeneous variables were simulated with tne CLJ1 as If no

reforms had been implemented. While this method dealt with the reforms

011 a very aggregate level and could not be used to assess the effect of

individual reform measures, comparison of the simulated values with the

actual values showed that the reforms had moved the economy In the di­

rection intended by reformers. According to the CLM, the reforms re­ sulted iu less government activity in the economy and in greater latitude

for producers, however, the reforms worsened slightly the position of

consumers compared to their income and consumption possibilities without

the reforms.

Tne last two applications of the reduced form examined alternate paths by which the economy could have developed. In the third problem, the trade-off between investment in manufacturing and in agriculture was

investigated. Using the investment experience of the French economy, an

alternate development path for Czechoslovakia was formulated for which investment in manufacturing was given lower priority and investment in agriculture higher priority. The proportion of total French investment

in manufacturing was imposed on total Czechoslovak investment in order

to calculate an alternate Czechoslovak manufacturing Investment series.

The difference between the alternate and the actual investment level was allocated to agriculture. Then, from the alternate investment series, alternate capital stocks were calculated. The alternate investment and -ill capital stock series, representing a different development path than actually occurred, were combined with the reduced form to Simulate values for eaca endogeneous variable. Results from the CLK indicated tnat the Czechoslovak, econooy could have followed a less restrictive agricultural investment policy and still achieved overall economic levels similar to actual ones. Additional investment in agriculture would have increased net material product in agriculture well beyond the actual level. Tne alternate development pth would have required little or no displacement of employment and only low cost to consumers in the form of slightly lower than actual disposable income and consumption.

The final application of the reduced form of the CfcM Involved the problem of population location Induced by lack, of adequate housing, because of the acute housing shortage, especially in urban areas where the majority of manufacturing jobs are located, many manufacturing work­ ers have been forced to commute from rural areas. Historically, planners had preferred to invest in productive transportation rather than nonpro­ ductive housing. A counterfactual problem was formulated in the frame­ work. of a Tinbergen-type analysis of a one percent autonomous shift of the rural population to urban areas. The shift in population was to be induced by a targeted increase in Investment for housing and services and was constrained by the target of unchanged total employment. The policy instruments of the central planners used to meet these goals were in­ vestment in agriculture and in manufacturing, respectively. A compari­ son of the control versus actual levels of the instruments was presented in Table 4.11* Further, the effect of the population shift, the control levels of the policy variables and, de facto, the planners' preferences for investment In transportation was simulated for all other endogeneous variables. From the standpoint of the CEM, investment in commuting fa­ cilities rather than housing lowered the costs of industrialization to planners because transportation had both productive and nonproductive uses. For, under the counterfactual shifted population situation, net material product would have been lower. While planners benefited from the actual population location, the net effect on consumers is not clear.

Although disposable personal income would have been slightly lower with the population shift, consumers, most likely, would have been willing to trade lower income for more housing.

Further Developments

While the objectives of this study have been satisfied with the application of the operational version of the CEM herein, further devel­ opments with and of the CEM are desirable. This final section presents some of the improvements and further applications of the CEM in its pre­ sent form and several new directions of research vhich would re­ quire major changes and additions to the present specifications of the

CLM.

As discussed in Chapter 11, the CEDB was designed specifically to facilitate the process of updating the series required by the CEM.

As more current data become available it is intended that this data will be added to the CEDE and the CEM will be re-estimated with the enlarged sample. Also, the new data will be used to evaluate post-estimation forecasting ability of the CEM with both actual and projected values of the exogeneous variables.^ Moreover, further tests of the historical 2 goodness of fit of each equation of the CEM will be conducted. Z13

Iu eitner its present form or an updated version, the CEM has many possible applications including forecasts with different project­

ions of the exogeneous variables than used in Chapter IV, variants of

the policy analyses in Chapter IV and the simulation of other alterna­

tive developments of the Czechoslovak economy. One such couaterfactual historical scenario would be to assume that plan targets, annual or

five year, had been reached. Then with the CEM and the planned levels of exogeneous variables, e.g., investment, the effect of successful plan achievement on the endogeneous variables could be simulated and compared with the actual behavior. Or, those endogeneous variables which are planned, e.g., national income, could be targeted and the control values of exogeneous policy variables calculated and compared with their actual and planned values. In this way, the Internal consistency of plans could be evaluated with the CLM. However, this particular analysis requires 3 data on planned variables, preferably time series covering the entire estimation period. Problems of availability, varying coverage from year to year as well as the lack of one-to-one correspondence between the planners* definition and the CEM*6 of a particular variable would have to be solved. Even if these problems were solved by assumption, the CEM

"as is" could provide Information for a qualitative analysis of the ef­

fect of plans.

In order to refine the CEM further, at least three new aveuues

of research should be investigated, all of which will require changes and additions to the present equation specifications. The first^ refine- u.ent would be to disaggregate the CEM on a sectoral and/or regional

basis. Additional detail for productive versus nonproductive, i.e.. 214 branches or oven specific industrial branches could be distinguished.

The foreign trade sector could be disaggregated by major product groups, e.g., raw materials and finished goods. A regional disaggregation of tne CEM by the Czech and Slovak Republics, CSK and SSR respectively, could be made, linking two regional sub-models to the CEM,** With the federalization in the late 196Urs, some time series data, consistently estimated for both the CSR. and 5SR have become available.^ The major limitation on any scheme of disaggregation will be the availability of data.

The second important direction of research would be to investi­ gate the possibilities, beyond the simple time trend, for Including the time dimension in the CEM. As discussed in Chapter 111, initial tests for lag structure in individual equations have been unsuccessful. From the lack of lagged endogeneous variables in the current version of the

CEM, the undesirable and erroneous conclusion could be drawn that past economic behavior has no bearing on the present. Without further ex­ tensive research little can be said _a priori about the complex inter­ relationships which the existence of central planning introduces into the lag structure of particular equations. In the construction of the

CEM it has been implicitly assumed that a simple specification, i.e., no lag9 , with an I? and SER equal or superior to that of a more complex specification with lags is preferred because the degree of approximation to reality is known and not incorrect. However, the correctness of the more complex specification, especially one with a larger mean squared error, is much less certain.^ Thus, research efforts should be directed to discovering the appropriate distributed lag structure— if any can 21i

be said conclusively to exist— for specific equations. Moreover, the

lack of knowledge about the effects of central planning which play cru- 8 cial roles in specific assumptions should be redressed.

The final direction, perhaps the most difficult, to be explored

is the proper specification of the plan in an econometric model. One

of the roost striking elements of the models of socialist economies which q have come to the author's attention, is the fact that very little, if

any, mention is made of the plan. Because one of the hallmarks of

socialist economies is economic planning, this omission as a key factor

is a serious one. In the CLM, the plan Is included implicitly in the

control capability planners could exercise over exogeneous variables,

e.g., investment, and in the correspondence between endogeneous variables,

and planned magnitudes,^ e.g., national income.

One potential way of explicitly introducing the plan into the model would be to include planned budget expenditures as explanatory var­

iables.^^ However, this takes a very incomplete account of the role of

the plan. No doubt the plan does imply various monetary aggregates which will closely agree with the actual values of those aggregates during the

plan period. However, the plan also deals with levels of production,

employment, wages, prices, etc. To the extent that these are Ignored,

the model omits a large part of economic reality. Furthermore, the omis­

sion of these elements glosses over an important function of the plan, namely the mobilization productive efforts. The plan not only specifies budgets, etc., but also seeks to stimulate the development of production.

Thus, to ignore planned production targets is to Ignore an important

factor in the operation of the Czechoslovak economy. 216

Unfortunately, this difficulty cannot be overcome by simply specifying the plan targets as explanatory variables because the high correlation between plan and subsequent events would simply overpower the other explanatory variables. Consequently, in some equations, the plan must be introduced indirectly, utilizing explanatory variables which are directly influenced by the plan. In other cases, however, the use of plan targets a9 explanatory variables would be indispensable. The availability and consistency of tine series data on planned targets, as discussed above, will be the main constraints on the explicit inclusion of the plan in an historical econometric model.

From the directions of research required for the improvement of the CLM it is clear that the econometric modeling of socialist economies is still in its infancy. Nevertheless, the progress already evident suggests that the construction of such models will assume a more signi­ ficant role in the future. 1 See Svar.j, et. al. f )_45‘.

? For e-anrle, the ab ility of the 0‘ K to cap hire turninr points

w ill bo evaliuntod.

3 Sen the notes to Chapter I for potential sources of data.

4 The order of discussion is not intended to indicate relative

ir.oortance; and indication of the ease of accomplishing the

suryssted chanre is intended.

5 Glickman [54], pp. 171-174* discusses a prototype multiregional

econometric model which could serve as a starting p o in t . — ** \ ~1 6 See recent issues of Stnfcistika ro£enka: CS5R (. 45. .

7 Koreover, by Occam's Razor, sim nlicity, per se, counts as a

positive attribute of the unlayyed specification.

£1 For example see the discussion about the assumption of block

diayonality of Z in Chapter III or the assumption of no auto­

correlation in Chapter II.

9 See the reviews by £ujan and Kolek jjL29j or Shapiro and

Halabuk [117].

10 This allows Tinberyen-tyre analyses of plans.

11 'This is done in the SRI-VFFA model of the Soviet Union [ 59] *

L68] and L93j .

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L97] Mehta, J. S., Swany, P. A. V. B. "3ayesian Analysis of a Bivariatc Normal Distribution with Incomplete Obser— vationa," JAG A, 68, No. 344 (Dec., 1973), pt). 922- 927.

;.90j Kichal, J. M. Central Planning in CzechoSlovakia: Organ­ ization for Growth in the Mature? Economy. Stanford, CaJif.:Stanford University Press, i960.

1.9 9' _ i Ilikhal evsky, D, "Moscow Gtnte Unive-sity Promrymne 'Mathematical Methods in Economic^," Economics of Planning. 4 (1964).

L io o ] Moody, M. L, , Idiffer, F. V/. "A Gross Regional Product Apnronch to Model—building," Western Economic Journal, 7 (1969), pp. 391-402. 2 26

101 iior -east :rn, 0. On the Accuracy of Heononis Observations. Princeton, IT. J. : Pri n cot on University Press, 1973.

107 Myers, P. P. "Pooula1-.ion and Manor :(1orcp in .'testsrn Turope: 1990 to 1996,'* in Aoorientation and Commercial Relations of the Iconorles of Has tern Hurope. U.S. Confess, Joint Economic Committee, Washington, D.C.: UM0P0, 1974* pa. 471-J78. j_103 ; Kaohtigal, V. "The National Income of Czechoslovakia from 1948-1963*" Czechoslovak Economic Papers, 5 (1965), pp. 167-174.

L104 j ITerlove, Ii. "A Tabular Survey of liacro-Kconometric Modelst" International Economic Review, 7* No. 2 (May* 1966) pp. 127-175.

[105] Move* A. "2;V Percent and All That," Soviet Studies. (July, 1964)* pp. 17—21.

^106"j ------The Soviet Economy (Second Revised Edition). Mew York, N.Y.: Praeger Publishers, 1969. l107j Pelikan, J. "Development and Structure of Savings Deposits of the Population," Czechoslovak Economic Digest, (June, 1972)* PP. 13-34.

[108_J Pesek, B. P. "Econonrc Policies Since 1948," in A Study of Contemporary Czechoslovakia. J. Hajda* ed., New Haven* Conn.: Human Relations Area Files, Inc., 1955* pp. 411-449-

[J1093 ------Gross National Product of Czechoslovakia in Monetary and Real Terms 1946-58. ^Chicago, 111.: University of Chicago Pre33, 1965. jllOJ ------"The New Economic Model in Czechoslovakia," in Money and Plan, G, Grossman, ed., Berk1ey, Calif.: University of California Press, 1968, pp. 106-128*

[111j Population Policy in Czechoslovakia. V. Jindra, trans., Prague: Orbis, 1974. l112] Pryor, F. L. Public Expenditures in Communist and Capitalist Nations. Homewood, 111.: Ii. D. Irwin, Inc., 1965* PP. 334-340.

[i 13”] Pryor, P. L,, Pryor, Z. P. Foreign Trade and Intervfar Czech­ oslovak -Economic Development, IDRC Paper No. 21. New Haven, Conn.: Yale University Press, March, 1973. 227

L 11 4 Pryor, F. L., et. al. "Czechoslovak Ag-rerate Product .Ion in ■; he Tnt ■■rwar Period," Rev lev; of Incone r»rv: wealth. 17 (March, 1971 )j PP* 35-59.

1,115.! Rhodes, 0. "Non-theoroticr.l Errors ■ r.d Ten tin- Economic Hypotheses," Economic Inquiry. 13 (Sept., 1975) * pp. 437-444.

LUfi.i Humbler, "Feynes' Theories and Economic Problems of Our Day (A Tentative Marxist Evaluation)," Czechoslovak Economic Papers. 7 (1966), pp. 137-152.

a n ] Shapiro, H. T,, Halabuk, L. "Macro-Ecor.ometric Model 'Building in Socialist and Non-Socialist Countries— A Comparative Study," paper presented at the Third world Congress of the Econometric Society, Toronto, Canada, (August, 1975).

; n o ^ik, 0. Czechoslovakia: The Bureaucratic Economy. White Plains, N.Y. : International Arts and Science Press, 1972.

L119] ------"Czechoslovakia: Prohibitive Odds," Chapter 4 of Reforms in the Soviet and Eastern European Economies, L. A. I). Dellin, Ii. Gross, eds., Lexington, Mass.: D. C. Hea.th and Co., 1972, pp. 59-74*

LI 20] Simons, E. A. "Causal Ordering and Identifiability," Chapter III of Studies in Econometric Methods, Cowles Commission for Research in Economic, Monograph Ho. 14, Hew York, N.Y.: John Wiley and Sons, Inc., 1957.

L121] Snell, E. M. "Eastern Europe's Trade and Payments with the Industrial West," Reorientetion and Commercial Relations of the Economies of Eastern Europe. US Congress, Joint Economic Committee, Washington, D,C.:USGP0, 1074, pp. 682-724.

L122] Spulber, II. The Soviet Economy: Structure. Principles, Problems. Hew York, K.Y.: V/. W. Morton and Co., Inc., 1969.

Stator Etatisticky urad Cisla pro kazdeko 1968/9. Prague: SNTL, 196b.

[124] ------Pohyb Obyvatelstva v ffeskoslovenske Socialisticke Republice' v Role. 1950. 195'5i i960 , 1965. ' Prague: n.d. a 25] ------ntatisticaka roSenka; a3SR, 1962, 1963, 1964, 1965, 1967, 1968. Prague: SNTL. 223

1 '->6 G trap, I , " Cor-pari n ' the c+ar.aard oLiving and tr.e Overall .Efficiency of Production in the CJJR and France , ” Cartrrn herons :m .,c enemies. f> (Gunman 1968 } pp. 24-43. •tf l 12? Gutan, I. " M 0 Pi re t Tentative econometric Model of toe Czechoslovak Economy," University of Pennsylvania Economic Research Unit, 3-970 (mi men a’aph) .

v l 123! Guinn, I., Kolek, J. "A quarterly Forecasting Model of the Czechoslovak Economy," paper presentee at the European Meeting of the Econometric Gociety, Grenoble, France, (Copt., 1974). i 129] ------"...onometric Uacromodels in Socialist Countries," paper presented at the International Gtatistical Insti­ tute, Warsavr, Poland, (kept., 1975)*

L130] §ujan, I,, Tkac, M. "The Econometric Forecasting Model of Czechoslovakia," pa,per presented et the European Meet­ ing of the Econometric Society, Cslo, Norway, (July, 1 9 7 5 ).

H 3 l ] Theil, H. Principles of Econometrics. few York, U.Y. ; John Wiley and Gons, Inc., 1971.

Ll32] Tons, K. , Hajek, M. "Technologi cal Chan ye, Production Functions and Economic Grov-th in Czechoslovakia, Czechoslovak Economic Manors. 12 (1970).

1.133] United Nations, Economic Comnission for Europe "A Mote on Gome Aspects of National Accounting Methodology in Eastern Eurpoe and the Soviet Union," Economic Palletin for Eurone. 11, 2 (1959) PP. 52-66.

L 1 5 4 ] ------Economic Bulletin for Europe. 1959. H (June, 1959)*

1.155] — Economic Guryev of Eu.rone. 1952, 1954, 1955-1960, 1962, Part II, 1963, 1964, i960, 1971, 1972. New York, U.Y.: United Nations. i.136] U.B. Arms Control and Disarmament Agency, Bureau of Economic Analysis World Military Kxnenditurcs and Arms Trade 1965-73. V/as hir.pt on, B.C.: UGOEO, 1974, p?.' 22-66.

1.157] U.G. Be ;artment of Gorrerce, Bureau of the Gonsus Pooula- tion Reports, Series P-26, No. 122, Washinrton, D.C.: ViGi'C, 1975.

L158] Van Brabant, J. Bilateralism and Gtracturul Bill at o r h ism, in Ir.tra-CKEA Trade. Rotterdam: Rotterdam University Press, 1973. 2 7 3

'] 39 J. M rvr* .. ■ Cansui~:pv. ion }r:\\a 5 ior. for* the Czech­ oslovak kooaoi'-iy and V. 3 ^-70; ( 197? (nirinorTaph). jl^O ------"A. Short-:Vrn kcono.etric ’ ole 1 o " CnoeroSlovakia (1950-1 970)," 197? (;.ii’neo3Tarh). Al’PKifDIX A

. DA'!1 A 3AAE

250 LIST nF t a b l e s '

TITLE r A (,F

~GR'n ss i n v f s t m f N T ~ nNcroD un r w F C a c e m f n t t t t t t h f "n AT T m A L"' f c o t t t s!y ------r" ■

GROSS INVFSTMF NT (CONTINUED) ?

“ AN ALTERNATE BREAKDOWN OF" TOTAL INVESTMFNT '"■= PLANT + FCJIPorNT ...... ?,

RELATED SFRIES: GROSS INVF STME NT ; OLD DEFINITION, PRICES: 52-66=6nKCS,67-=67KLS ^

'“RE L A T E D SERI E S T~GRTISS~TNVFf Ttf ENT“"COtTTTfTUETTTPkTC ET “ ?“AT/E“7nrFTTfTTnTAl^ V i VTSTMTSTn ' “ r~ ‘

PRICE INDICES (ANNUAL AVERAGE, CCST OF LIVING) FOR WORKERS* C EMPLOYES* HSFHLDf 6

“PRICE INDICES (ANNUAL AVERAGE, COST-OF LIVING) FDR COOPERATIVE-FARMFRS* 'HSEH..DS 7

PRICE INDICES (ANN AVF. , COST OF lIVING) : ALL HSEHlDS (WTD AVF OF WKRS S FiRVRS) S'

“ PfiTCF TNDICES:' ALL H'nU5FHOLD?r'FOk"lW“ '=" HO * - -

PRICES (ALL AG GOODS): WTD AVF (OF COMPULSORY C ABOVE-COOT A) DELIVERY PRICES lu

““MO N E Y SUPPLY: CURRENCY IN CTRCUL ATION“ AT-YEAR* S' END ~ 1]

DEPOSITS IN SAVINGS ACCOUNTS: CURRENT KCS. 12 SAVINGS DEPOSTTS AND~“PFR‘SONAG S A~VINGT~1‘9TS7“K C S . ------

GOVERNMENT INCOME COMPONENTS: BUDGETED, CURRENT KCS. Ia

GOVERNMENT EXPENDITURE COMPONENTS: BUDGETED,- CukRLNT KCTV “ If

GOVERNMENT FINANCE: ACTUAL REVENUES AND COMPONENTS, CURRENT KCS. 16

GOVERNMENT INCOME" COMPONENTS'* CDRRTNT~KCS* (CONTINUECT)------“---“----“ 1?“ “

GOVERNMENT FINANCE: ACTUAL EXPENDITURES AND COMPONENTS IP

GOVERNMENT EXPENOITURE COhPONt NT S ~(C ONT INUED ) “ 19

GOVERNMENT FINANCE: ACTUAL REVENUES, CONSTANT 1967 KCS. t DEFL: GUY, TOTAL) ?o

‘GOVERNMENT INCOMF'‘C0MP‘0NENfTS7~XCINSTANT~X'CS'i CCT!NTINDFTTJ------~2\ 231

GOVERNMENT FINANCE: ACTUAL EXPENDITURES, CONSTANT 1967 KCS. 22 LIST HP TABLES

title p a ge

'GOVEKMME NT 0 EF IC IT'Ck" SURPUfS " A'S ED ' ON ACT'uA L “ k T v T NUE S~ lE S f*TcTTjXl- F~X PpNDYTURES""" 2?

FOREIGN TRADE: TOTAL EXPORTS AND IMPORTS WITH BALANCE OF PAYMENT*-, In CURR KCS. 2A

FOREIGN TRADF: COMPONENTS OF EXPORTS

COMPONENTS OF EXPORTS (CONTINUED ) 2A

EG REIGN TR AD F s~C 0M PnWE¥T'S~'0‘F 'l"MPTi r TS ... ~ /7

COMPONENTS OF IMPORTS (CONTINUED I 2F

FOREIGN TRADE: EXPORTS AND IMPORTS IN 1^67 KCS (DEFLi GNY, MFG AND AGR1 29

FOREIGN TRADE: TOTAL EXPORTS AND IMPORTS WITH BALANCE OF PAYMENTS, IN I 9*7 KCS. -.0

'FOREIGN DATA: OT HE ft 'CM’fc A COUNT Kl FSV ~ GNP In CURRFVl'T U ^ T "t~Rr CAt'FTTSF RTF'S VMP) " 2 1

FOREIGN DATA (CONTINUED) = ?

FOREIGN DATA (CONTINUED) "" ??

NATIONAL INCOME ORIGINATING BY SfCTOR 2A

'NATIONTAC* INCOME "ORLG TN'ATING“ eY"SE l TOR~IN~CONTTTNT T ^ 7 > rT c S5

IMPLICIT GROSS NATIONAL INCOME PRICE DEFLATORS (19*7=100) 3*

AGRICULTURAL DATA: MISCELLANEOUS SERIES ...... 37

CAPITAL STOCK: NEW DEFINITION, "BASIC ASSETS" ?fl

BASIC ASS ETS ( CONTINUED!------?ci----

RELATED SERIES: CAPITAL STOCK; 0,.D DEFINITT 00» PRODUCTIVE BASIC FUNDS AH

ANNUAL AVERAGE EMPLOYED POPULATION: BY SFCTOR .. M

ANNUAL AVERAGE EMPLOYED POPULATION: BY SECTOR ICONT.) 4?

'DE KOGR APHY: ‘ LABOR’ FORC E“ C0T1PON i N’TS--EC'O'NOMTCAL LY''T"C'TT^F'~Pn^urATlON ...... Z y ro

DEMOGRAPHY: MID-YEAR POPULATION; RURAL AREAS = PLACES UNDER ?000 INHABITANT*- A4 ^ 1233 LtJ -ii r- cr rv ifi r- o. e o *-* Stu -4 L'k lr, u> 4 - 11 L i -i -i a

{ft |I O k : or rC i i> H *~l i >—i Z h- e X t-. h i I + nr t - O' K r* 3> c a 1 >■ Ui jj u, Kt Uj f- CD U r J' tT ll -4 o ISi 2 tr *1 C ■_j _J < Z- 1 a 1 t cv g <1 2 C - u . /> 2 c- rr. b V. o L> £ *—p u- LC UJ of h j ,-L U.' In o UJ l l I f V c p K h P- C t—1 ■<. zT H Gj V. i L 6 t - £ C p r u CL •- 1— Li P cn l_> U3 U-’ 3 it / , k n £ > s + r> P r> r ~i kT L i -p- 2 ■*l u Lu tL -« n p c L ■ i/p Lf j ?> X) X c P 2 b >; LJ fc h- _ l U) Ll- UJ o ►—p i r * vi t _l !+ UJ <1 *- Ht _ l K-■ p < U p _J fer > cr U ■ i LU 5 UJ < i 03 h . D CJ •- L~p X it l/l K; • a . L. VO C\| tf 'ft U: LU »—p ii i n _l i" LL cu LU H Ll i i Cl LL i CL C l_> o C ••• •-» g pe c C j t/. <• Si •—< c ll ll 1 i b 1- o 2 z -J 1- '2C u- u- j b 1- K b i z lL Lu Ll h” t- u b >* U j o c Li Li LU < KI ik -r 2 2 ►-* z < c z K OD Li 1 H «—• O O p H X O U; a a pr £ X £ -J o 2 CL o LLI o ►H w *— •p c Li UJ O c < it 1 LU P of 2 Of ne H- of _l _J 0c U CL Of cr. P L i •— > Z> D. 4 . 1 ll a Li u of ae or CLO Lj 11 Uj CL z I C! — i. U- o o c a 2 ft cr. of «L *•» ti Li cr, O I* h K < Cl 2 Uj UJ 3 ! LL l_J b _J ! r- p < X O ii p U C < cr, u.' UJ tu < 0 LU I/V u> cr. 1— 2 o -t h- P c O ►-* £ c£ ! a U j pH *5- P j< Cf pL Z> > V p Cl < Li K H- CL fL cr. ca 03 x> • t Z uj C 2 2 <. s < F* *» u o. QC > CL UJ Li 1 u> >~j _J i_i _i u LU D X X II III r i J —I UJ -i X o a UJ Lu L l-r h-4 i-H LU < u * > > 2 z Li b no P 03 —- 3 c Q O D t— , 1 Ul a iz 2= M Lh < UUJ K 1 LU LU -1 o lu 1- u- 2 O O b b u < l i i L u £ cf ll _l _J < W 3C ~ K J— £ E < •4 < < < < ►; r •> 2 2 3 z> n XI P UJ UJ • » +i *« i—i M *• 2 z z 2 2 2 a c> 2 3“ >- >- i > Z 2 z 2 2 Z «t ft o X X X Li X •4 < «t 3> > > > > is UJ UJ U j UJ o a C. a 2 2 Cl -t < 4 < ■c* X CC CL CL o i r ■ l i s t of t a b l e s ' ......

TITLE PAOf

‘CETMPnNFMTS OF' ‘ PEFSONAT' CCFNSIWPTTO 1\T“ ‘ t-7

COMPONENTS OF PERS CONS: RET Al * FOOD=PERCENT F 0 0 0 + TOT A L RETAIL TmOE PURCHASE Af

COMPONENTS OF PERS CONS: CA=CONS A C 0000 S- R F T L" F OOP +A"G MKT* P UR +CON S IN KINO 6R

COMPONENTS OF PERS CONS: CM=CONS MFG GOOPS=TDTAL RETL PUKCHASES-CA 70 gross ..investment JTncju.ut-ing replacement ) in the national ichnomv

YEAR TOTAL INVESTMENT INDUSTRIAL CONSTRUCTION MANUFACTURING MAN;|FACTURINr- AS ______IN V L S U F J iT______LNVfi.MF.NI______INVESTED + CST PEKCFMT nr TOTAL BILLION 1967 KCS BILLION 19£7 KCS BILLION 1%7 KCS BILLION 1967 I'CS PERCENT _ T 7 5 5 ------? F 7 * 6 ? ------IL 766 F ------C7^4T“ . n . 2 H _ 1954 R 26.230 K ''10.540 R <‘',447 K - 10.937 K ?!20 1965 30.37E Li .4 29 0.595 11 .024 56.289 1956 R 34.289 R 12.248 R 0.620 R 12.868 R 37.62F 1957 37 . 4 5 7 i3_t540__ ._ L f.l.0 3 14.647 ... . 39,491 19 56 42". 214* ' 16.7 93 1.167 17.960 *♦ 2. c 6 *; 1959 50.653 *0.3 80 1*363 21.743 4 3 .CIO 196a 56.626 22 *6^6 l , 8 r.Q 14.5 55 A •= , 7 6 ’ 1961 60.519 24,515 l . f .. __26 .400 .. 4?.6 2? 1962 58.603 " 25 .679 1.535 27.’ 14 4 A .28*1 1963 52.252 23.2CO 1.014 24.714 4 6.34) 1964 58 * 162 25.336 1.529 26.465 4 e . f 46 1965 62.596 26.762 J .,7 0 7 2 8 .vFQ 49,t?4 1 9 6 r " 68.610 BlT.OOO 7.16P 3 2*165 “ "4 4 .EPS ' 1967 70.446 28.346 2.3^5 30.701 4 0 . 4 p 1 1968 76.207 27.369 2.891 50.260 39.706 1969 R3«573 31.815 5.04 6 ,74.8 60 ...... 41,717 1970 " 88.475 - "33*565 3*23? 36.797 41.56 1 1971 93.464 35.110 3.292 38 .4^2 41.0 70 1972 101,641 36.133 ? * C 7 ? 40.006 3^.360

SRC E: ~W2~ 11970 T973")’ " V 2 ~ 'T I'9 7 u T " 19TTT" n (19T0. ^1'9'7?T 4?, CALCiILATF'D “ CALCULATED R = THIS FIGURE ESTIMATED WITH A RFGRF CSIGN EQIJATN UR BASED _CN ..FIGURES ESTIMATED W. IT H R E OR r- S S J 0f J_ E Q.UAIN S , J- AGT GROSS INVESTMENT ( CONTINUf D)

YEAK AGRICULTURAL AGRICULTURE AS OTHER INVESTMENT OI^ER AS PFPCTNT

INVESTMENT PERCENT OF TOTAL = TOTAL*( MFG+AG) OF TOTAL

BILLION 1967 KCS PERCENT PILLION 1967 KCS OERCFNT T 5 7 3 — TT T o T Z 44.TT0 1954 R 3.2 52 R" 11.520 R I 3 . 9 9 X "R" 49.561 1955 4.286 14.109 15,068 49,602 1956 R 5 .479 R 15.979 R 15.942 R 46.494 1957 5 .799 15.4P? 17.015 45.425 “1958-- ~ 7 T T V 4 V T 6 ~ . 6 R “4“ " T 7 T 2 T T 4 0 V 7 T 1 --- 1959 8.667 17.144 20.143 3° . P 4f 1960 9 ,564 16.i90 22.507 3U,747 1961 10.204 16.861 23*915 39.516 1962 8 . 8 B 4 " 15.1 CP ' 2*2". TG 5" 38.6 1 3 1963 7.608 14.560 ?o,430 ■*4,0 90 1969 8 .448 14.52 5 23.049 39.629 1965 8.748 13.976 25.2PR 40 . 70 c: T 9 6 7 r ~ " 9“ .26 5~~ ~T 3 VETO 4 ~ z 7 w r r 7 ? . T n 1967 7 . 7 2 9 10*97? 32.016 45.44P 1968 9.818 12.883 36.129 4 7 . 4 C 9 1969 9 .954 11 .91 vf 38,7*9 4 6 . 3 7 7 1970 9.449“ 10.6-8 0 “ 42Y22P~ 4 7 . 7 2 C 1971 10.005 10.702 45.077 4 ^ .2 1 0 1972 10.936 10.759 5 0.699 40,f pA

SRCFT~ff7“ TT9rcrt 197 31' rAirucATEP" TALCULAT FIT XALCULATFrr R = THIS FIGURE ESTIMATED WITH A REGRESSION FQUATN OR BASED ON FIGURES ESTIMATED WITH REGRESSION EOUATNS.

ro On All Fk NAT t ORE AKDOWN OF TOTAL INVE STRENT_^ PLANT + EQUIPMENT

YFAR BUILDINGS A NO MACHINERY ANO

CONSTRUCTION EQUIPMENT

BILLION 1*67 KCS BILLION 1*67 KCS r ? r r 7T7 TZT~ 7 7 T * r 1*64 21. CO* R 7. 23° 19 RE 22 • 137 8.241 19 Eft R 29. 534 R 9.775 1*57 ?ft . 333 11.124 95FT ~2BV 44 O' T 3 7 £ £ 4 - 1959 34. e\i 16.020 1960 3 B . 060 Ifi , r'6 6 1961 40. '■ 26,896 1968 47. 892 28 • 3 1 5 1969 51. 68? 31.8 99 1970 54. 104 34.2 P1 1*71 57. 795 ? 5.6 9 * 1*7? 64, 20 3 37.438

'SRCri"#? TT970“ 19 73T“ ^2“ fT9Tt'rrT^7?1 ---

R = THIS FIGURE ES TI MATEO WITH A REGRESSION FQIJATN HR 8 ASFP ON F 1G UR f S E S_T IM A TE 0 W IT H REGRESSION FOUATNS PACE

°F'.4TM Qtnc^ I W F ^ T^FNT; n L n_ n t: r T IT T n, J. PRICES: 5?-66=64KC S .67-*67KC $

T . V T n T A l INVESTMENT AGRICULTURE INDUSTRY CONSTRUCTION

IINCL PHRFSTRY)

3 ILL KCC (A8nyf ) BILL KCS (An0VE) BILL KCS I ABOVE 1 BILL KCS (ABOVE)

L>5 i 2 1.236 2 . 37 0 .8,3.03______. . __Q_* 435 .... 944 20.8?3 7. 330 8.231 0. 370 >53 72.401 '‘.177 8.173 0.460 .953 25.451 4.031 9.550 0.505 :)9 ? 77 .37 I 4.281 X L . A I 2 0.861 .45 i 31 .5 l16 9.187 .3.022 C.960 ) 59 37.759 6. 364 5.783 1.099 4 7.419 7 . 108 .7,637 1,447 ,Q&1 4 6,465 7.553 9.009 ...... 1 .523.. 94 2 4 4.269 6.694 .9.967 1.228 .063 39.413 5 . 74 5 .3.119 0.819 L -) 4 4 34.714 5. 756 .7.601 0.933 .96 5 47.321 ...... 5.982 .... 8.623 ... 1.258 ,96o 4 7.004 6 .464 20.631 1.485 9 6 ^ 7L.4 46 7. 779 2 3 . 3 4 6 2.355 10 f>3 lpHy******** *********** ********* ** ******R**** 19 6 9 ******* * ** * *********** *********** .9 7Q * ****** **** *********** *********** m * •* ********* * Y; ifc tt|t *********** *********** 9 r? + a****-1'**** £ n y* jx -4; * 3e * # * a- ********* ***********

sr? ru : «■; ( 1 < r m ------TTT\ 0fTP’l------w ? (1560 I------

* = NOT AVAILABLE, 238 P A G*r S Q FL A T r 1 SERIES: 0 ^ FS INVESTMENT CONTINUED (PRICES SAME AS FOR TOTAL INVESTMENT)

YE/1 5 PHI Ll)I NOS AND MACHINERY AND

CCNSTPUCTICN EQUIPMENT

BILL KCS (ABOVE) 8 11 L KCS (ABOVE)

1 9 ??“ I t .4 91 ------5 7 7 ?? ------...... 1954 “'''.. ' 'TA-.123----- ... 6 . 5 0 0 ------' ' 1Q55 15.083 7.318 1956 16.7?2 0.729 1997 17 . 9 A? 9.879 j 7 5 P 1 h . A 9 7 12.13^ 1959 23.529 14.226 1960 2? .032 16.4P7 1 961 27.2 30 13.179 "' 1962 .. 26.210 13.058 19 69 23,039 16.374 16 66 23.7e6 15.929 196 5 25.010 17.811 ~~Tr>KC~ /h . 9T)b

' SRCF: ' # 2 ' [ r°6*8 1 ‘ ".. kl ( t ^ 5 «) ' ' ‘ ......

* = NOT AVAILABLE.

ro V* vo PAGF

PJUtfc. I NO ! L E_S_ ( ANN: UA L _A_V F G_F j_C_H> TG F _Lly ING )_ F 0.cL_ *0* iSJU

YEAR OVERALL LOST OF ALL G O 005 FOODSTUFFS (INCL INDUSTRIAL GHOpf SFRVICF?

L IV IN G ______BfrVS t PUP CATR)______

1937 = 100 1937 = 100 1937 = ICO 1937 = U-n 1037 = k g k r s 7 7 r s r ------r— tottt??----- r— r r-TT^r 19 54 129*900 159. ICC 164.?,'i0 148.5 44,?ori 1935 126.500 154.2 00 ] 61.800 1?9.9C'> 40. lot 1956 123.200 149.700 157.000 136.000 4p.9(:0 1957 120.POO 146.6 00 152.700 136.000 4F.9fp 19 58 * 120.7CC ~ ~ 1"46~.4'CC" 152',6CO ‘ l‘3'5TtF0e A'C.gPn' 1959 117 * POO 142.5u» 14F.9CD 1 30.400 48.9CC 1960 105.300 136-2C0 141.6C0 127.800 4 r,2O0 1961 108.600 135.200 141.100 _ 126.100 4P.2C0 1962 11G.0GP '""“’137.1(0'' 144.200 " 126.300 4P.?on 1963 110.6C0 137 .900 W4.3O0 126.100 4t.300 1964 111.ICC 138 .200 145.100 1 2 7 . 70C a q .V.C 1965 112.460 139,000 146, 100 128.100 Sl.opf 1966 ------11 ? '.TOT ------138". 90 0 .... "T47.100 12 977uO *r? .2 'VO 1967 114.500 140 .800 146.600 131.500 54.FOG 1968 115.700 142.300 141.200 133.400 55.6nr 1969 119.400 14 7 . 4C0 151.000 141.ROO 3F.70C 1970 121.900 149.2CC 151.600' 145.2CO 61.300 19 71 121.4C0 148,660 151 ,400 143.9 0*: Ol.4C{ 1972 1 ? U. 90 0 148. Of 0 151•lUO 142. cn7 61.6 00

SRCE: »2, 14...... C 2 V 1 4 " 14' O V " T 4 “ — ' > 2 , "14 "

R = THIS FIGURE ESTIMATED WITH A R FGRF CSION F7 UA TN DR R A 5 F 0 ON F1GURFS F STIMATFD WITH. RFGRFES10 r J.F^UATNS. B i £ U . N P ICF.? J ANNUAL AVFRAGt. COST OF LIVING! FOR CPOPFRATTVF F ARMCR 5 1 HS»=m PS

YEAR OVCKAlL COST OF ALL GOODS FOODSTUFFS IlNCL INDUSTRIAL GnnnS SFRVTCF5

U VXN G .______B.EV5-..L£U5„CAJfiJ______

19? 7 = 100 1937 = 1OO ic?7 = 100 1°*7 = 1 GO 19?7 = ICC T7T3 rOTTSW R rF?7£?ir 1<--- ■T^^55“ “ TTT“ .’IJ7T2.T5— 1954 143.400 K 104.139 R 173.915 R 157.187 P. 65.265 1955 137.300 157.500 145.500 151.100 6 ] . 7 0 0 1°56 133.4CG 152.400 140.500 144.?00 M . 7 C C 1?57______1.3.1., 501______1J?D^00______1 5 7 . 1 ^ ______144. 7no______j, \ t 7 l*.£L 19 5? 132.500 151.400 160.400 144.700 M.70C 19 59 128.fi00 146.fi00 15 6.000 139.400 61.700 1960 117.000 132.800 136.000 129.900 6 1.20C 1961 .116.300 ____ _13L^8C0._ ... 135.500. ______125^3 00 - 61.200 196? 117.500 133.3C0 136.400 128.700 61.200 1963 118.400 134.400 138.2uO 131.400 6 1 . 4 0 0 1964 118.900 135.000 139.400 131.000 61.700 1965 119.300 135.400 n^.finr, 131.500 6?.7o<. 1966 '119".WO 135’.2"C0 " l3F.Yi.70 132.600 " 64.000" 1967 122.IOC 137.5 00 13«.oop 135.2 00 67.000 1968 123.300 139.2(0 141*700 136.700 67.0PC 1969 128.POO 144.?U0 __ 144.460 _____ 145.300 _ 71.7t.fl 1970 131.200" 145.200 '...... 145.000 ' 148 .8 00' ...... 74.<«0C 1971 130.900 145.300 144.900 147.500 75.000 1972 130.400 144.900 144.800 146.600 76.300 SRCE: WZ» 14------? 2 V X 4 ------*2 7“ 14" S7TT4 i ?71i ------

R - THIS FIGURF ESTIMATED WITH A REGRESSION FQUATN OR EASED ON F IG UR I: S E ST IMA T r D W T TH RFGR ESS10N E3UATNS._____ hA p>_ ICE INDICES I ANN A VE , COST Oh Li VI_NG) : AL L HSFHLf^ (WTO AVC OF WK R S _C__F M i" R 5 )

YE Aft OVERALL CCST DF ALL GOODE FUDPSTJFFS (INCL INP'JSTklA onnns s e r v i c e s __LIVING______REVS C PUP CATR)

1937 = 100 1937 = HO = 10 0 1037 = ion 1 93

r o r n — ■ T O T X ToT.oTo' X ----- R~" TtTTo rn ~— TT- T v T T7T' 1954 R 1 33*400 R 1bO * 400 R 166.0(50.. " k " ...150,700 R 42. t or 19 55 124.400 155.100 162.FOG 142.9 00 5 2. 60.0 1956 126.000 150.500 15 5.000 138.8 00 52. 4 00 14 57 123*700 147 .6 00 1 •"> 3.90 0 138.1on 5 7* '-no ‘19-50---- 12 3 7 7 0 CT T 4 7 7 70 0 " 15 4,600 r3 7 75T00— T 2* 2'or- 1959 1 2 0 . 4CC 143.500 15 0.600 132.6 00 :>? * 1960 occ 111.400 1? 6 * 1C 0 141.500 128.300 51 . 2 00 1961 110.10G 1 3 4 . 5 ( 0 14 0.000 126.6 00 44. r .or 1962 11o.800 1 3 5 . 6 0 0 14 27300 126.100 ~ 50. 500 1963 112*100 137.200 143.100 120.700 5 0. f on 1964 112*600 137.600 ]44.ono 120.300 51. 6C 0 1465 113.7CC 130 .3 00 14 4. °r c I 25,7 CO • — ” 53. POO 1 9 66 ------T 1 4 7 0 0 rr~ T7C7Z'O0' ~T4? 7f T.TT' 12Q 7f’or - 5 5 7 ? o r 1967 115.900 140.2 00 14 5.400 132.5 00 5 7. 100 19 6P 1 1 7 . 1 0 0 141.760 147.000 134,000 57. F 00 1969 121.500 146 .0 0(0 149.000 1 4 2 .400 61. 000 197C 123.5C0 148 ,5 00 150.50 0“ " ' 1 4 5 . 0 00 " 6 3. 600 1971 123 .00 C 140.100 15 0.300 144 .5 CO 63. 6 C 0 19 72 122.4U0 147.5 CO 16*). 1 Of: 1 40.5 CO 6 3. 60 f

SRCE : ' #27 14 14' R = THIS FIGURF PSTIMATFD WITH A REGRESSION OQUATM Ou PAS^P..°N_f:lGURf 5 ESTIMATED WITH RE GRE 5 5 ION EOUATNS. * AGE

PR ICE INP1 CPS: ALL HOU Sf HOLDc FOR 19 67 - UC-

YEAR OVERALL COST UP all GOODS FDOrS TUFFS tINCL INDUSTRIAL OINPS Sf Rv l C M

LIVING______L _ . _T — ___T . _ i- — . ^ Br-vr r, PUB CATR)

1967 = 1-.0 1967 = 100 1467 = 100 1967 = 100 1967 = ICC -p.--- T ? 5 I ~ T T --- ‘T 7 i 7 * r r 5 ------K ~ T I ^ 7 5 ^ — --- R----- T 7 T 7 ? 7 o ------■’ir r r r s * ----- “T ------snrzrr— 19 54 R 1 15.099 R 1 14.408 R 114.71 f: "R 113.736" 7 9 7.4 69 1955 111.648 110.628 111.967 1G7.B49 92.]19 19 56 1 0 8 . 7 1 ^ 1 17 .3 47 108.666 104.755 9 1 . 7 6 9 19 57 1 06.730 105.278 105.846 1 04jJ? 2 6 91 . c9 *+ 19 58 “ 306V 730 ' 1 0 5 . 349' 106.327 1 Gr3 . 7 74T ' 91,419 ’ 1959 103.883 102.354 103.5 76 100.075 91.068 1960 96.117 97,0 76 9 6.074 9 7.207 8 9 . 6 6 7 1961 94.996 95.9 34 96.2°6 9 5.5^7 8 P. 967 1962 95.600 ' 9 6.719 9 7 . 8 6 8 95 .1 70 88.441 1963 96.721 97.8 60 o p . 4 1 8 97.13? 88.967 19 64 97.153 9 8.145 9 9 . 0 3 7 96.830 90.36 8 1965 ve. 10? 9& .645 9 9 . 6 5 6 97.13? 9 4.2P1 1966" 9 8 . 3 6 1 98.5 73 98.900 97.962 9 6 . 6 7 ? 1967 IOC.000 10C.CGO 100.000 100,000 ICO.nor 1968 101.035 101.0 70 101 .100 101.13? 101, 2?6 1969 1 0 4 . 8 3 2 104.708 1026 107.4 72 106,830 1970 1 0 6 . 5 5 7 105.9 20" 103.506 110.03R 111.3(4 1971 106. 12 6 l u 5 .635 10 3.370 109.057 U 1 .?F4 1972 105.608 105.2 u7 103.232 108.30? 111.384

SRCF:~CAtCULATEP ------CTAtTUHATED" C ATUILATFP tTSU'CUCATEP' 'C’ATTTTCATrP “

R = THIS FIGURE ESTIMATED WITH A REGRESSION E:)UATN OR BASE D ON F IGUR F.S E ST IMA T E P W ITH REGRESS TO,N_I;^UATN.S_.

n > -P- ',244 il

vl C-J 0 3

1

I c I I 3 c\ “- < 0 ■.t O' p" crR-<-*.-irnccrvcNr~c J,a>>o0'-i X JC c ^ CM'C.O^i^k'vJ-Cf^-O' C '-•ir.gLC ■ o C I'J- tf- -A ^ ■O -t u- cOa. ojc& c a^cc-Cf o !«*.»•r • 4 » m * • « X lU.'rcjCO C O O v S v C oc Cid u I I CL r? o

a. o

t >1 ad ' — - . C 1 ^ J 'V ^ ' w C ^L O C CJ C C'O'.I O O O C i>C C OO C C- c -I «jc. >or- cm -t r-if'—.j"t h j a CL IT O U D d iN O 'fiG i-i'f ■“•'fjo c c -^CMOj rnro ac; X x t . ; c m cvi^rcicO s o r^ f^ r^ a . c^ac '-•w (N jr-vr»'1(n CM 0 U.J CL 1 Z f- u.: n CM 3 a ft ( I cC 1 *1 4- m < f'Joc c- c- <—*cm co in %o r*- a. c 1 - •-* cm <1 ti'*.r-icw\ r~cAa'.^t«c i,,q ■i/'C'C -i swC'i^r*- jo tr o' cr a>o lOO'O'Off'O'trc'O' a- ^a- cr £> ^ oc

Lj C' O' O'

t/"- LL. O' a: il HONEY__SUPPl.Y CUKRENCY__I N CIHCULAT107_ AT YF A K«S ENP

YEAR CURRENCY IN NSNFY SUPPLY NONEY SUPPLY

CJ R_C_ULAT ION______(DEEl : GNY. TOT) (OFFL iCPT DVR*L)

PILLION CURR KCS BIuLIPN 1967 KCS MILLION 1967 KCS 1 5 7 3 ------u T S Z X ------7 7 ^ 1 ------1954 5.600 5.624 5.n?9 1956 6.5 00 6.3°1 5.P?? 1956 7.300 7.592 6.715 1957 7.3C0 7.696 6 .RAO 1 95 * ------7 7 8 7 0 ------F 7 4 0 5 ------7 7 7 0 3 1959 8 . 1 0 0 9.10B 7.797 1960 7.346 8.330 7.643 1961 8.82? i n . U p 9.2 87 1962 ‘ P.893 10.144 "9.302 1963 8 .971 10.156 9 •? 74 1964 8.745 10.158 9.001 1965 10.244 12.022 10.44? 1 9 6 6 ------1 T . 5 7 0 ------1771 49 ------1 1 7 7 6 3 1967 13.077 13.077 13.077 I960 16.216 15.776 14.050 1969 17.311 1 5.86'a 1 6 . M 3 1 9 7 0 ” “ " 1 7 . 6 4 8 " " 167?30 ~ 1 6 7 7 5 0 1971 19.491 17.741 18.366 1972 22.006 20.115 20.837

SRCF:~47^“ 9, 1 5... X4CC EJTAT^ CTTCULATFD DEPOSI LS_ J N._ _$A VI NGS ACCOUNTS : CURRENT K C C.,

YEAR TOTAL DEPOSITS NET ANN DEPOSITS

=CHANOF IN TOTAL

PILLION CUKR KC S riTLLION CURR KCS

.“I T ____ 1 , 7 3 7 .'“’ 1964 h » L P 9 1 • 1A b 1955 5,719 1 ,630 19 66 8.257 ? . s 3 M 1957 11.377 3,120 ..” 19 5P K . 1 5 6 ~ 2.81 5 1959 17.053 ?.85n I960 19.36 2 ?.30p I 9 M 22.272 2.910 19o? 2 5 . 9 3 0 2.667 1963 27.59? 2 • 5 K A 1 9 0 ** 31 .153 3.700 1965 35.637 A.AAA 1 9 6 6 39•56 5 3. 92"P 1 96 7 AS.in? 5.620 1968 5 9 . 0 4 3 3.861 1969 5?.see *t • 8 AS 1576 ~ 63.5n>3 5.615 1971 7 3.846 lo.3A3 1972 85.571 11.625

■ s u e r : n r 2 i n m ------

R = THIS FIGURE ESTIMATED WITH A REGRESSION EQUATN OR RASED ON FIGURfS ESTIMATlP W IT H R E G R ESS I ON E.W.A INS.. PAGE 13

SAVINGS. DEPOSITS... AND . P&RSONA. L ..SA.VI MG.:_..L9.6.7 . K.C$_.

YFAK TOTAL DEPOSITS TOTAL DEPOSITS NtT ANN DEPOSITS NET ANN DEPOSIT 5 PERSONAL SAVING1

_ ... (PERL: GN.Yf T0T7 _J.DEEL5.CRI OVRA.Ll. (DEFL: GNY * TOT ) ( f l :cp.i_ d v ,ral >_R L?DEI-C H-C4-CQ

BILLION 1967 KCS BILLION 1967 KCS BILLION 1467 KCS 3 ILL ION 1967 KCS 3 1 L LI ON I 4 67 KC

1953 ...... 2 7 X 2 T - V ----2 7 Z T Z . 1 ft T 7 T 2 r ” _ ~ Z S .----- n r * IT —- ---- " 2 7 7 1 6 * ---- 19 $4 3.965 3 .553 1.113 7.997 ft ? 0 * CEF m s 5 . 6 2 3 5.17? 1.603 1 ,460 ft 26.P4D 19 56 fc. 587 7.596 2.639 2.335 R 3 6.62 s- 19 5.7______11. , 5 9 5______1 0 . 6 < Q _____ 3 . 2 8 3 _____ 2 .923_„ ._R______2 2 . 9.5 5 195& 15.297 13 .3 01 3.03 8 ? .641 ft 3 8.16? 19 59 1 4.175 16 .416 3.214 2 .751 ft 4 ^ . 3 54 196G 21 .954 2 0.144 2.617 2.4-71 4 c . 16 f 19 6 J 2 5.543 ...... 23 . 4 4 5 3.327 ______3.063 . 56.Ilf 19 62 28.44C 26.067 3.04? ? .790 5 2.205 1963 3 1 . 1 2 4 28,425 2.891 2 .641 56.483 19 6 4 36.233 3? . 117 4.?Ofl 3 .30 8 47 * 04/ 19 69 ...... 41.fPJ.3______?6.*.327______cuZ 1 5 . _ . 4,.5j D_... .. ___55..5.1_7_._ 1966 4 4 . 9 6 5 40.2 24 4. 464 3 ,9V* 4 * . 5 p 4 1967 45.18? 45.1P2 5.620 5 . 6?Q 2 9 . P 77 1968 4 7 . 7 1 3 4 8 . 5 4 0 3.7 56 3.821 2 6 .C81 19 69 4 9 . 3 8 0 51»4c4 4, 440 ____ . 4. 6 2 2 ! 8 * ° 8 2 1970 57.748 49 .595 P , 744 9.023 ?4.2 89 1971 6 7 . 2 1 6 69.5 87 9.414 9.746 3?.0Q3 1972 7 8 . 1 2 4 80.932 1 <>.626 11 .60h 37 ,7?f

SRCE: "CALCULATED" CA L lU l aT E D ~ ~~ CALCULATED c a lG ul ATED “ cT l c u l 'ai L'D '

ft = THIS FIGURE ESTIMATED WITH A REGRESSION F3UATN Oft EASED . ON. F J GUft E S E S T I.H AT DO WITH RE C R E S S. ION _.££) >j A T NS , PAGE 14 r,nvc ^ '*r -jt : ' 1 cnm■- f,nv*[ rm fn L5j up gftjn_(_ r ij5 kent * r s

Y c A ^ T r T A L Rf-VENUE !. FROM THF TI . TAXES t FEES III. MISC.

( = 1 + 11 + M I ) SOCIALIST SECTOR FROM POPULATION

[lILLir* fiJ°P KCS BILLION CUFR KCS BILLION CURR KCS BILLION CUPP KCS

... _ 1.9j9£)<>.. 3 3 0 7C .?6 2 R 69.051 D 10.114 ■R 0.0^7 0 7 . 5 0 9 R " 76.4 69 R 10.198 R 0.813 m 3 F ''.200 71.100 10.300 2.800 in So 90,104 77.244 10.730 2.330 ins 7 SP.7 43 B5.092 10.683 2.465 t n -j S 94/775 80.4 06 11/312.. 3.007 96.210 81.771 11.314 3. 145 I960 101.693 89.3 7 C 11.268 3.255 m s i 112,614 97.255 11.777 - 173;32? ’ 3.502 ...... ' 19 S’2 107.066 12.490 3. 75 0 1961 125.877 108.873 12.767 4.237 1964 110*414 113.161 13.105 4. 148 196 5 1 16.203 97,575 14.392 4. 2 3 6 19 66 1 32.'9;)5 n ? . 7 i o ....15.2 5‘9 — 4.936 196 7 142.522 120.9 79 16.669 4.874 m s ? 144.Blk 121.759 f ... *.* jjf y. j. 18,240 5.315 1969 * »****.; **** *********** ******* **** -U 7.-j ****** fi it'-ky- * - ***-**“** ■*■*■**■■ ■" *********** 1971 * t -J: * w :’t * v * * *********** *********** 19 77 A****.*?1!**** * * * * * * * * * * * ***********

■ ' 1 57 Ct :

----- .... . ------■ ...... 'fc - 4P T AVAILABLE. u = TH1p FIGURF E S TIM A TE w ITH A RFGP ESS TON EOUATN OR _t,^vTnr^rr*TTTijRTS -STT7cvTFTVMrrTT3MrFTrFT:STTnN"~Fi3TnsTTrr; no -T-* CD LA U' o 5249 d C£. \— u'. l*— ooc-("Jj- 'i’o^o: m w * « « « Of O O O —*

t / J d

or CT';oO'OOr'|mcrff'fv^-f\JCE)(\jf—*01-3- #;> * ■& CL hOOO-yoocffl-inrt'-t^PiN^ *,**•» 1/1 •—I r“.«^'©mlO'r-r-u\oom(r(\.,,a>mO'* * * * Z Of LJ i • • • U j Z3 o n r ^ o o 'C r cc ro a '! o — o o 'c x m m * i * * * LL O r i « H H U f t * fc L U U j c # 'fc * * r\j o VI fc fc fc * f c . f c fc * * 1 * -#■ -* * *■ * > CTi l/l O 1/ y LL L or. o o o a- ''Of- tnc— t-- f'-c'.ar rA-j-fc -m k fc LL OL o o o N W - * « . -j-'ro— v^rr^r^c'O' -j-fNjsr cc^—irvmcr vri * !* * *» cc- O' d • •!• • • • • • •;• • . $ p p & —-r U. I'-t-co cc— ;Otr Of^vf ^r^cc ocr, lJ- * p * # CO f(M rs.(Nj L/l ir O! d C: o SC LL or K 1 CL an m *o * ;fc fc L j * r* «■ < ►-* t r fc- 4 ■m ic r L ■ I > u . — l T> i < * L. u . ►— ’^Jr i t y ; X f £_ V i ► - • - i i C' i c K >■ cy* O n * - o _ — j i t • • • ***•<••»• * # * fc fc p ’ fj* fc>- < f - ,i> tr^'i <— * W " \fs o s'* l \ A sT fc fc * o !1 *1 > 'jl cr, e c r * ^ C 10 ’—'fVCvj 0 » —* l ^ v j - fc fc 4- t i ^ ■ _j _j i S ;: it **' ‘ fc- 4 1 K fc n « -J I K i.-. fc fc L f 1- M — t 1 ■K kt fc if ^ ' fc—» t ■tt ■*■ fc fc - r v y O. 1 L i ' t y •J- i f l sL5 r*- oc O' o ~*.C\J rn^fifi C' r— cr <7- o fi \ U ' L* lf> A l / \ v O 0 0 > 0 £ O C ■Cfc-fc'fc- I--*' t L . U'C'C'O o-o a-ic- O'c c cr CfcU'C'Lfc'T O' t - > RACE If -00VERNMENT FIH ANCt : AC.IUAL-ftitflNUUi AND.. CDrPD'iENTS_• t URR ENT KC*.______

YEAR TOTAL REVENUE I. FROM THF IT. TAXES L CEFS III. MISC.

— R_ = — I^_t— LI— ♦ -I-LI— SOCIALIST SECTO? FROM POPLll ATTHN______

HILLION CURR KCS BILLION CURK KCS PILLION CURR KC5 n ILLION CURL KCS

t t o »t ' " f t ft 9 7 6 ? ? " .."ft _ ' -6.?o 7---- 1954 R 93 . 1 3 2 R 8 0.943 R 9.757 R ?.?«2 1955 R 91 ,841 K 79,otf R 5.881 R 1.591 1956 97.3 00 R 84.301 R 10-407 R 2 . 60 2 1957 . . l O U S Q O ...... tLi.tj.co I9.6 83 /■^3J 7. 195ft R- I C O . 307 KR6 .6 8 P R 11 .117 R 2,50? 1959 R 101.R02 f< 8 7 . 8 7 4 A 11*1 .?o R ?,rop 1960 R 97 .352 R 84.34? R 11 .064 K 1.9^6 1961 R 106,231 ._ . . R 9 1 . 3 ° o R .. -1L.685- -5. 156 1962 R 1 1 6 . 9 4 4 R 9 9 . L9? R 12.5 66 R 4.4r* 1963 1 22.226 105.264 12.656 *..4 Of, 1964 121.243 1C3.193 13.579 4,471 1965 1 21. *.4 4? . .101.765 14,60? 4 lucT 1966 1 56 . 390 1 3 5 . 0 8 0 16.696 '>.61- 1967 146.416 124.135 17.263 5.C1P 1968 153 .9 06 127.47? 2 0 . 1 3R 6 . 2 4 6 1969 184 . 4 2 9 149.502 _22.529 1970 2 0 5 . 8 6 0 1 71.494 2 3.7 36 10.63 6 1971 2 19.021 181.762 25.056 12.2C? 1972 2 2 3 . 5 0 3 1S4.19C 26. 519 12.794

~ SRC E: ' w 12", 2 (1468 ,73) *12, 2 {1968 «7?) * 12, 2 (1968 ,73) #12, ? (1°68,7

= THIS FIGURE ESTIMATED WITH A REGRESSION FQ’JATN OR BASED ON f J G UR R S. E STIM A T F D WITH . R E GR LS_s IQN_.E QU/T NS 250 GOVERNMENT INCCMC_COMPONENTS* CURRENT KCS. (CONTINUED)

year turnover taxes profit taxes wage taxfs misc income: v i -

= TT ______PT = jr_- TT ______- W T ______R__-_(_TT +_ _P_T+_W T J

BILLION CURR KCS BILLION CJRh KCS BILLION CUk R KCS ^iLLintJ CURR KC'

T ? 5 ? ~ f r -” v t r t L r “ 3 “ “7 ? . 7 ^ 8 ----- R------r r ^ T T — ■< 3 • 6 T 6 1954 R 93 .7 53 R 37.2 40 f> " 7.7PO ... 0 4 . ^ F 1°55 R 44.2 9 G R 35.67 8 8.218 R 2 . 6 5 £ 1956 45 .400 R 3 8 . 90 1 P. 8 38 R . 1 6 1 1957 44 . 5 00 4 3 . 3 0 0 9.077 4.9?? — 19 B P “ "-----46V70O" ---- R' 39 »9 F F ------“ ' QV?"4T K'~.. 7.V2TO ' 1959 K 46.511 K 41.36? 9.736 R 4 * 1 Cl 1 I960 R 47.4 16 R 3 6 . o ?6 K . 4 ? 3 R 7 . c p 6 1961 R 48, 4 7 0 R 4 2*9?^ 11.178 R 7.66 3 196? R 49.133 "R 50.76 C n.64fi _ “ R “' c . 4 0 ? 1963 5 0.690 5 4.574 11.771 5.19] 1969 49.4 35 53.758 12.471 5.579 1965 51.295 50.470 13.769 6.41'? '1966 ---- 5I'.4C2 ~ ------F3. 590 142.0 91' ‘ 19 1967 39 *0 ?? P5.ll 3 IP. 5 05 6.77 6 196P 41.162 86.31 1 1P.?49 6.184 1969 46.77? 10? . f; ? (l ?1.72? n . 1 05 1970 50 * 13 P 121 . 7 5 6 ...... 2 2.9 94 " 1 1. 37? 1971 50 . P 3 « 1?0 . V? 3 24.2^4 1 3.00 3 1972 5 3.0 35 131.156 ?6.o39 1 3,674 I

‘SRCF: W \7 t ~ 7 1196 8 h CALCULATFp — .... ~7rr2y "2 “TI WT^STTSlXUCATrn ----

r - this f i g u k l ts t i m a t e d w i t h a r e g r e s s i o n f -juatn ok HA SEP ON FIGURES ESTIMATED WITH RFCRFSSION FQ'JATMS. t AGf If ^GOVE RN ME NT F I NANCF: ACTUAL EXPENDITURES AND COMPONENTS______

YEAR TOT EXPENPITURE = IV. IN NATIONAL V. rOtlAL ANP VI. DEFENCE ANP VII. ADMINISTR.

______I V+V+V.l♦VII+VIII ECONOMY JCALUXl>KL SFRVICF S SAFETY

BILLION CURR KCS BILLION LURR KCS BILLION CURR KCS BILLION CU»R KCS BILLION CURk KC^ T* 5 ? TT5T1 ?r IT T t ?n ? r R_ ~I77T5r “IT 77 19 54 81.23C R 47 .4 58 R 23,459 R 7,84? R ' 2.471 1 9 5 5 83 *943 R 4 8 . 4 8 4 R 2 4 . 9 3 5 R 8 . 0 1 4 R 2.61C 195fc 9 5 . 9 3 0 5 5 . 2 0 0 2 8 . 2 0 0 9. 100 2. 430 1 9 5 7 1 0 A . 854 55.3 00 3 3 . 5 5 4 8 t700 ^ . 30C “T9 58 9 1 . 6 2 1 " “R" ” 51*3«7 R" 2 9 . 1 1 r "R B.Xi?" R “3.6? 1 1959 9 9 . 1 9 4 R 5 4 . 2 5 0 R 3 2 . 2 3 1 R 8.483 R 2.730 1 9 6 0 1 0 7 . 0 9 7 R 57. 2 3 8 R 3 7 , 5 3 0 K 9 .485 R 2. 844 1961 111.612 R _ 8 8 . 4 4 6 R 39,986 _R_ _ ° . 7 7 2 R 2.905 1962 1 2 1 . 3 8 6 “R" '62 . 6 41 R 46, 3 0 2 R TP 7393 "R 3.05 0 1 9 6 3 1 2 0 . 8 7 1 6? .611 44.88? 1 0 . 8 2 9 2.549 1 9 6 4 1 1 9 . 0 7 3 5 9 . 5 4 6 46.665 10. 2 1 7 2.646 1 9 6 5 1 2 1 . 4 4 7 5 9 , 8 3 2 4 8 . 7 7 4 10.1?5 2.716 * 1 9 6 6 " 1 5 4 7 7 9 5" ~ 8 9 7 7 7 1 " '5177377 T 0 7 8 4 T 2.745 1 9 6 7 1 4 7 . 1 9 3 7 0 . 7 2 1 6 0 , 9 7 0 12.3B6 3.117 196 8 151.393 6 8 . 4 1 3 66.068 13.189 3,723 1 9 6 9 1 7 6 . 9 4 2 7 8 . 1 2 2 80.403 14,768 4.145 19 7 0 1 9 4 . 3 1 3 67 .648 "87.467 14.0 19 4 . 2 7 9 1971 2 1 2 . 6 3 2 101 .755 9 0 . 6 6 5 15.943 4. 365 1972 2 1 6 . 5 6 9 97 .1 50 9 7 . 9 6 5 16.770 4 . 6 5 4 SRCF r - * 13", 2 ■ (T96577 3) 7127"2 11"9687731 ‘"pTI fcir7T5rTT77” ?” l1"36'877T)_^ T 7 ;~ ? “ IT 977-7? ? )'

R = THIS FIGURE ESTIMATEO WITH A REGRESSION FOUATN OR .. bASFP ON FIGURj"S FSTIMATED_.WJTH_RE.GRtLSi_LQiJ_F_aUATNS^, __

ro VJ1 ro ^53 L l O <1

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T*, z n c n o GOVERNMENT FI NANCE A C T U A L REV E NuES C ON 5T fc N T 1^67 KCS. (PlFl : GNY, THTAL)

YEAR TOTAL REVE-lMUF I* FROM THF TI. TAXES 5 FEFS III. MI«C.

*__= 1 + II + III SOCIALIST SECTOk FkOM POPULA T I O N ______

BILLION 1*567 KCS BILLION 1*567 KCS BULI3N 1^67 KCS BIl LTON 1467 KCS ------£ ~ ft 757BT99 R” 66 • *.>61""" ------T ~ z n ------ft~ ------“ 7T? 1954 R 90.303 R 7 E . 5 3 3 " “ R ' 4,461 ’ ' ft' “"" "2.2K. 1*565 ft 90.300 R 7fi .626 ft 4,716 ft 1 . 9 5 f 1956 101.190 ft 57 .67/ R l'».P?3 ft 7,696 1957 107.327 92 .567 p..... 11.263 ... R .. 3.6 07 195B R - ■ICR^OBP---- ■ R ...- 9 3 “, 41?' ir.o'Brr- 2.696, - 1959 R 1 14.469 R 96. BCR ft 1?.*»C3 ft '.157 I960 ft 110.366 R 95.634 ft 1 ? , r> 4 6 R 2.2 06 1961 K 121 .634 ft 10 4 . 5 ]? ft 13.4 ft " .61^ 1962 ft ' 133 .398 R 113.94? R I 4.334 ■ ‘'-.Ilf 1963 138•367 119.165 14.214 4 . 9 ft P 1969 1 4 0 . R32 119.666 15,773 ■ 7. 10 :' 1965 142.52b 119.430 17.24? 5. R *7 1966 ‘“T77Y736’'------1 5 3 V 5 1 7 ~ " T T .f^ S 1967 146.416 124.135 17.263 . >1 f 1966 149 .732 124.ul6 ] 4 . 59? 6.174 1969 169.000 137.07 7 2 0.6 44 1 1 .775 19 70 157.204 155.95? 21,525 °.667 1971 199.357 165 .443 7 7.5 06 11.107 1®72 2 04.2 9? 168.35 0 2*.240 1 1 » 6°4

SRCF: CALCOLATnV------CALCULATED C ALCUTATFD ------C A r a i O T G r R = THIS FIGURE ESTIMATED WITH A RFGRFSSION E7UATN OR BASED ON_FIGURFS ESTIMATED WITH REGRESSION hQlJATNS. PAG:- ? i GOVERNMENT INCOME COMPONENTS » CONSTANT KCS.

YEAR TURNOVER TAXES PROFIT TAXES W A G r- TAXrS MISC INCOME

BILL ION ]Q67 KCS EILLIPN 1°67 KC 9 BILLION' 1967 KCS “ IL LI ON 1 W 7 KCS ■ FT* 1 W K _ " ? 7 7 m nr 7JT.67F"" R "" 6. DR*-' — t — — ^774 ^" 1954 R 4 2.424 R ?6.1OF R 7.'544'"' R 6.2?6 1^55 R 43.547 k 35 • u R 0 F .(»HD k 3 , 5 ” 1956 47.215 R 4 0 . 4 5 6 9.191 R 4 . 3 2 7 1957 *>6.9 16 45.651 ______o._sjr___ R 4.1 or, 1956 50.3 22“ R“ ' 43 . 0 0 0 10.364 ...4.61 1" 1050 R 52,200 k 4 6 . f 1 6 1C r°47 k 4.71: I960 R 53 .764 R 41 ,67( 11.Rl* R •j g n 1961 R 65.5 64 R 4 9.224 1?.6?o R 4.201 1962 K 56 .046' R 57.002 13.2M7 R 6.1 64 1963 67.3 64 61 .7F1 13.325 C‘, 9 77 1964 57.422 6?.444 14.466 6.4 RG 1965 60.140 54.23] 15,57? 7.5?6 1966 ” 56.604 95.OOF 16.014 .."_B.?0 4 1967 39.022 65.113 1 *> • 505 6.776 1966 40 .046 63.970 17.764 7.962 I960 4? .fl 5 9 94.21 p 19.914 12 .iT)c 1976 45.504 110.256 20.0 1: 1 .7A1 1°71 46 .275 119,160 22.076 1 1 .F?7 197? 48 .476 119.RR2 2 3.^35 12.4 0 c , . . SRCE: CAItULATFD ' CALCULATED" C4TC0L 4 T E 0 " --- n r CULATFH- R - THIS FIGURE ESTIMATED WITH A KIGRESSION F-;HE\TN OR BASED ON .FIGURES. ESTIMATED WITH GRF S 5 ION .EQUAT N? *

fo V‘ vji GOVERN HE NT_. FI U AN C E :.._AC.UJ A L FXP ENDITU R Ft ON ST ANT 1*67 KCS.

YEAR EXP ON MEG L AG OTHER EXPNDITURS TOTAL=MFGLAG + CURR TOT nFFLATI

ID.EEL:-GIiTLi_MLA.l_.(V E£L!LJSNY.*._0 ThLL^IiiEH EXPENDITRS (PFFLi GNY. TOT )

PILLION 1967 KCS PILLION 1967 KCS PILLION 1*67 KC 5 n IL L Tn N l*f7 KCS

TS53 A " S S T F S r A “ - T u 7 v l ~ 7 7 7 5 ^ 6 _ A 76,5-5? TT- 195A R 4 6 . 7 3 0 R 35,636 R 12.363 R 7 8 . 7 6 2 1955 R 5 8 .0*8 R 3R.CP9 R 86.187 R 82.534 195* R 57,281 R 61 .*1 C R 109.1*1 R 90.76*: 1957 R 57.558 R 4 2 . 5 3 7 R 1 r,0 ^o cs R 195 8 R ”53 .9 58 A 6 3.224 0 U7.1F? H * 6.728 1959 R 58 .567 R 68 .540 R 12 7.107 R 11!.5?f 1960 f< f 2 .554 R 75 ,^72 R 137.626 R 121.436 1961 R 64.716 R 61.33? .8 14 6.048 R ..,12 3,006 1562 K 68.271 R 92.1*8 R 160.470 R " 138.46^ 1963 67.9 39 9 1 . 1 0 4 I6Q .043 1 7 6 . 8 3 3 196 A 67.393 76.521 143.915 178.312 1965 67^.066 . 85,78* 152.856 14?j .5?F 1966 "98 . 814* 8 2,*16 H 1.730 1*67 69 .394 7 7 . 7 9 9 147.1*7 147.1*? 196 P 6 4 . 8 56 79,858 144.714 147.?f7 1969 69.425 8 8 ,3? 1 147,746 16-.17C 1570 76.569 1 0 0 . 3 U 1 76.880 176.707 1971 68 .9*0 106 .62* 1*5.61* 1 93.542 1972 84.827 114. 551 199.377 1*7.9 44

SRCE: "CALCULATED* CAiXUUA'TPr“ “ CALCULATED CaTC u l 'a t e T! R = THIS FIGURE ESTIMATED WITH A REGRESSION FOUATN OR EASED ON FIGURES ESTIMATED W TTH _ RE GR! S S ION E^itATNS E * 0 5

GOVERNMENT DEFICIT OK SURPLUS RASED ON ACTUAL KEVrNUFiS LESS ACTUAL c XPENDTTPk TS

YEAR SURPLUS = RFVTNU SURPLUS = REVsN'J

- E XE PND IT UK E S - EXEPNOITUrtES

B Il l ION CURR KCS BILLION 146? KCS

TOTR ----- “ r r o r ----- K------T 7 7 7 7 ------l ft54 R 11 .9C2 R “ 7,037 ...... 1955 R 7.698 R 4.113 195 A 1.370 R - 8.001 19 57 O. o ^ a R 7.232 T9EP R P * 686 ~R 0.9 06 19 59 R ? • 6 0 8 R - 1 2 . 6 3 8 19 AC R - 9.745 R - 27.240 1961 R -5.381 R -24.214 1962 R - 4 . 4 4 ? ■“R -?r. 07 r_...... ■ 1963 1.355 - 20.6 76 1964 2. 1 7 0 -3.0b2 1965 0.0 -ir.3?7 19 66 ~ 1.59 5 -3 • 0*34 L967 - w . 7 7 7 -0.777 196P 2.513 5.018 1969 7 . 4 8 7 11.254 197C 1 1 . 5 4 7 ' ' 10.324 1971 6. 3 8 9 3.738 1972 6. 0 3 4 4.915 <_R CE rxAxrucATFn cnxuirrrr-----

R s= THIS FIGURF ESTI MATEO WITH A REGRESSION EQUATl OR BASED ON FIGURES ESTIMATED WITH REGRESSION EOUATNS.

-■fO— PAGE ?4 FO REIGN TR AO F_: _T QT A L _E XP OR TS_ AND. J IMPORTS .. _WI TH RA LANCE °F PA Y ME NT 5. IN CURp Ki. %

YEAR I TOTAL EXPORT' II TOTAL IMPORTS BALANCE CT*

______PAYMENT*;- ! - IT

3IUIQN CURR KCS BILLION CURP KCC 3ILLI0N CURR KCC

1 ^ 3 ------^ 7 1 6 ? 6 . 7 ? v ]954 7.2 ?P 6.716 0 .8 47 195 5 8 .4 67 7.679 I .461 1956 9 ,9 PR R. 537 -0.209 1°*>7 9.776 9 19 P 5 195 8 ~10Y8'95'_ ' 9,772 —— k m - ■ 1959 12 .435 11.637 o.p?o I960 13.89? 13.072 0 . 1 63 1961 14.7 33 19.670 0 ,8 R° 1962 15,753 14.904 2 . 169 1963 17.723 15.564 1.056 1964 18.545 17.48° 0.115 1965 19.3 67 1°.24? 0.065 1966 ~19“.7~64 lo.69g 1.326 1967 20.6 22 15.796 -0.517 1968 21.6 38 2 2.165 o. 182 196 9 2 3 . 9 00 23.718 0.700 1970 27,3 0 5 ' " 26.605 .. 1”. 225 " 1571 3 0 . 0 55 28.870 1 . 6 7 6 1572 32.588 30.912 0.0

“ SRCE: ~ W 2 T ' 12 " *2 , 1 2 T^CnJUXTFTT

ro 'Ol CD pacf ?

10REICN_TKADF CCMPONE Mi_DF_ £ XPORTS

YEAR 1 MACHINERY AND II NONAGRIL FUEL MANUFACTURING

..... — ..EQU.IPJ1EML______Ji.-RAJfLMATL? IA1.S, .CqN.S’JM.£H_GGDD.S. -EJ21.£ -=1£L1*111—

PILLION tURR KCS BILLION CURk KCS a j LLTHN CUKk KCS ~ 3 7 £ T T ? . T r ? TITfTT' 6 .204 1954 2.7b7 2.33 4 1 ,050 5 r 1 6 1 1955 3 .6 60 2.84? 0 .940 7.463 1956 4 . 0 7 ? 3.109 1 .*>36 P .667 1957 3.993 ...... 2 . 7 ‘U'______.U£9 a EL.4PQ 195 6 4*728 ? .8 ? 1 ?• 00 5 4.554 195® 5.464 2.93 5 2.524 10.943 1960 6 .266 3 • 3?7 2.8 3'.j 1 2 .4 ? 7 1961. 6.567 ____ 3.53? . .z«fei_____ 12.960 1962 7.5 17 3.70 5 3.047 1 4 . ? 6 o 1963 8 , 4 7 4 4,018 3.244 15.736 1®64 8 .716 4. 7 6 4 3.2 00 16.68 5 1965 9 . 3 8 5 4 . 9 6 ( ______3.*J94_ Jl.^539. 1966 9.823 4. 6 1 7 37?£2 1 7.49? 1967 10.031 5.C2? 3.783 16.836 1966 1 0 . 6 73 5.145 3.923 19.741 1969 12.163 5 . f*68 3.803 2 1 . 8 3 4 1970 13.71? ...... 7 , 0 4 7 4.515 2 5.2 74" 1971 1 4.915 7.462 5.403 27.78 0 1972 16.086 7.89 3 6. 0 9P 3 0 . 0 7 7

SRCE F 2 .“X'ALXUrATIT SCACCDL~A“TED W ? '~ 'C ACCOOXEF) CXCXOrnrrT"

R = THIS FIGURE ESTIMATED WITH A RFGRF SSION FOUATN OR BASED ON FIGURFS E ST IMATED . WITH RFGRFSf.in_N_ EQUATNS .

ro ui vx> FiOP ?(-■

COMPONENTS OF F XPORTS (C ONTIMJFD )

YEAR IV AGRICULTURAL V LIVESTOCK VI FOODSTUFF? S AGRICULTURAL

RAW MATE RI AL^______RAW MATERIAL?____FX p ,TS_ =_ IV + V + VI.

FILLION CURR KCS BILLION CURR KCS BILLION C'JRR KCS MILLION CURR KCS 1^55 * ~.jT? o.koT' “CTrTT- ^ K^7f~ IPSA 0 .4 78 o.n '""'0 .594' “ 1.07? 1955 0.4 82 O.CC- 0,819 1.004 19 56 0.57V O.CC? C.739 l.'?l 1957 0 *606 0.CC6 0.675 1.2 6? I95B' ““ 0.567 0 .0 ' "0T774 ~ ~ I V I ' M " " 1955 0.6E4 n.ol? 0.796 1.69? 1960 0.726 O.ftll o,7?? 1.4 50 1961 0 . 8 3 7 __ 0.01? 0 . 9 0 3 1 . 7 c ' 1962 0 .75? O'.Oio C . 7 5 ? ..... '"" 1,526 1963 0.811 0 .Cl 6 1.16C 1.9R7 1964 0 .062 0.031 0.967 l.P6 f- 1965 0.53O 0.034 0.8 64 1.F1P 1966 0.992~ “ ■ 0.016------0T7 64'------1.7 7? ~ 1967 0.860 0.02 6 0.9 01 1.7F6 196 6 0.8 84 G.C /6 C.9 8 Q 1.807 1569 0.926 0.026 1.114 2.066 1570 0.967 ...... 0.02 5 1.039 ' " ' 2,0.71 1571 1 .0 09 0.03,9 1.272 2,315 1972 1.124 0*n^9 1.336 2.811

SRC E I ~ * ? ---- r2 CAL CULATFD----3 7 rXTUXTJt ATFTT" “C A T X U U A T F 0 --- K = THIS FIGURE ESTIMATED WITH A REGRESSION F1UATN OR _ RASED ON FIGURES ESTIMATED WITH REGRESSION EQUATNS._

ro C', o FOREION TRADE : L 0MPONE NTS_0F_ I K P O R T 5.

YEAK I MACHINFRY ANT II NONAGRIC FUEL IT! NHN-FOnp MANUFACTURING EQUIPMENT L_. RAW MATERIA LS CONSUMp R GOODS T MP Tc e I +11 +1 ] T

BILLION CURR KtS PILLION CUKk KC S BILLION CURR :

T9S3* “T7T7r T ,rr^A" -■ tv ' 7 T r * 1954 0, 7 9 9 2.263 C . 1 6 1 3 . 2 23 145* 1 ,006 2.546 0.31? 3 . 8 6 3 1956 1 ,465 2.t'9? u. 2 69 4 . 7 2 6 1Q57 1 ,8 7? 3.5 06 0 . 3 9 3 8.771 1958 " l i e n ~ 3". 547 0 . 3 4 2 ‘ . 7 16 1959 2.342 4.00 4 C . 3 2 3 6 ,66 4 196C 2 ,8 31 4,°4 5 0.437 8.2 1? 1961 3 »4?6 5 .69i 0 , 6 2 4 0 , 7 4 4 196? 3 ,903 5 . 7 4 4 0 , 6 46 1 ", 2 9? 19 63 3,978 5. 7 4 6 0.5 89 10,313 1964 4 . 9 1 8 6,268 0 . 6 6 3 11.PA® 1965 5.75R _ 6 ,997 1 .006 12,76.1 . 1966 " 6 . 3‘80~ 6 . 45 v ' '1.147 1^.973 1^67 5 ,9 06 6 , 6 f 9 1.067 1 3 . 6 6 ? 1968 6 .938 7. 6?7 1.56? 16.]3c 1969 7,561 6 . 114 1.965 17. 64(i 1976 8 .8 71 9 , 1:0 .3 2.261 20.1,33 1971 9.555 10.280 2.261 2 2. 0 8 6 1972 10.460 11 .067 2 . 4 0 3 2 3 , 9 ^ 0

SRCF : f 2," CALCUL ATFD* “ w 2V“CALCUCATFr ----# 2 1

R = THIS FIGURE ESTIMATEO WITH A REGRESSION F jtJATN OR EASED ON FIGURES E ST IMATfD WITH REGRESSION EQ’JATNS. E A GP ?f

C 0 M P m 41NTS„0 F. IMPnRT1 XC0NTIMJlD.1

YEAR IV AGRICULTURAL V LIVESTOCK VI FOOPST-J^FS C AGRICULTURAL

.&AVL_Nl4IERlALi_.. RAIL. K AT E RIALS. TMPTS - T V +V-t VT & ILLIDN CURR KCS PILLION CURK KCS BILLION CURR KCS bILLTON CURE KCC

T ^ T ~ TTTTTT "7^ X .3.0 20 1°54 1 .263 0.C07 2.203 1955 1*518 0 .00? 7 .196 3.716 1956 I *707 0 . 0 0 4 2.100 3.811 1957 _ -OiOQS.__ 2_t322_ i t * 214 1°58 "™ 1 .798 0.0 2.2 6? 4.456 1959 2.111 *1 * * * 1 c 2 . 74t, 4 . f 6«> 1960 1 .490 0.00 8 2.861 4.PK5 1961 2 *15? (i.not 2.690 1962 1 .845 0.00 j 2.763 4.611 1963 ? *013 0.00? 3.226 5*241 1964 2 .2 08 0.L17 3.415 5 * 6 4 C 1965 2_*396 _0_l o ? 4 _ 7*0 69 rV^P_l 1966 2 .TCP o.olo “3.21H K • 7 ? ^ 1967 2 .467 O . \ 10 4 3.158 c .63^ 1966 2 .524 0.02 1 3 . 4 7 2 6. 017 1969 ? *4,5 9 0*050 7.599 6 * 10 P 1970 2.465 0 .06° 3.936 6.470 1971 2*585 0 . U 6 4 4.135 6 * 7 F 1972 2 -908 0.05^ 4.C15 6.9P? SRCfT: “CALCULATECT CALCULATED' *3 2TnCLCuCTTC0 --- C A T r D C V T E'D' R = THIS FIGURE ESTIMATED WITH A REGRESSION EQUATN OR BASED ON FIGURES FSTIMATFD W I TH„ RE, GRES SJ O.N_Fj,LU_AT N S .______FOREIGN TRADf : EXPORTS AND IMPORTS IN 1967 KCS (DFFL: GNY, MF0 AND A GR )

year manufacturing agricultural manufacturing agricultural

______EXPORTS______EX.PQRIS______IMPORTS______IMP HRTS______

BILLION 1967KCS BILLION1967 KCS BILLION 1467 KCS 3TL LTON 1 « 7 KCS

m n k s t ^777 ^------1954 “ A ,<»49 2.076 2.067' A.?#-. 4 1955 6.260 1 .701 3.240 4.323 1956 7,840 2.131 4.270 6.149 1957 7.RR3 2.(>77 5.354 6.PC0 19 5P 9'. 174------2 . 0 7 7 ------5 7 4 T 9 ------XT. 2 76 “ ----- 1959 11.122 2.111 6.775 6 .PQO 1960 13.181 1.804 5.707 6.^06 1961 13.848 2.240 10,395 6.167 1962 1 5 . 2 24 1 .79 7 1 07 9 82 ------5,438 1963 16.578 2.414 10*865 6.370 1964 19.053 2.176 13.530 6 ,69c 1965 20.38? 1.876 16.99? 5,694 1966 20 .523------1 Y 7 9 5 ------I 5 7 9 4 j------5 7 7 47 ---- ' 1967 18.836 1 ,7?U 13.66? 5.6?4 1968 19.215 1.9J7 I5.7CP 6,080 1969 19.988 2.021 16.148 6.976 1970”” 22 .791 1.P54 “ 1 ff.-T 5 7 ------5.907 1971 25.102 2.034 19.956 ^,>)M 1972 27.279 2.232 21.704 6,?no ' “SR Xrr TACtUUATFTT------“ X AT.CIOTED"------CA1XUDTTET!------CAYCUU7TT D “

R = THIS FIGURE ESTIMATED WITH A REGRESSION EQUATN HR BASED ON FIGURES E ST IMA TED W TTH REGRESS ION _E 3UATN S .

ro cn V>J ruco -f FORE IGN TRADE TGT AL _ E XP0kJ5_ AND _I HP GRTS Kl TH„PALANCF J?i_ P N _ J W>7 -<(; c ,

YEAR I.TOTAL EXPORTS II.TOTAL IMPORTS 8 A L Oc PAVj-rNTS

bl LL ION 1967 KCS BIllION 1^67 KCS BILL! OX' 1967 KCS ~ : i m n i z t z v 3------lc54 7. o ? 5 ■ -?.?'25 1955 7.968 -1,696 1956 9.97? 10.4 24 -0.46? 1957 9.9 60 12.15 9 -2 .109 1958' 11 * ? 50"...... '11.765.. -Oi'51'5— " 195° 13.233 l?. 66 f - 0 . 4 3 ? 1 ° 6 0 14*°fS 19.716 0,779 1961 16.CPF 16.562 -0.675 1 9 6 ? ' 17.0 2? 16.421 “ 0 .66*1 1963 18.99? 17.235 1.758 lQ64 ?1 ,? ?9 2.0,129 1,100 1965 22.2^8 21.647 0.61 1 1 ^ 6 22.318" ' 7 1.7 *T0 - — ov cr t . 1«67 2 0 . 6 ? ? 19*296 I. *26 1966 21.13? 21.789 - 0,656 1969 2 2 . 0 0 9 22.125 -0.118 197C ?4.645 ...... 26.064" “ 0,5^1'"' "" 1 9 7 1 27.1 36 25.917 1.718 1972 29.511 27.01,1 1.601

’ SRCE: CAICUIA1TD CATC IJ LATFD C A L T G 1 T T E D ------R = THIS FIGURE ESTIMATED WITH A REGRESSION F^UATN DR BASED DM FIGURES ESTIMATED WITH .RF 0RFS.5 ION, EOUATNS.__

ro C6 -P* PAOF 31

FORE UN TATA: flThrp C r~ A C fUNTPIFS1 ONC IN CURRENT US t e RELATED SERIES < NV P)

YEAR SOVIET UN I"\l :NtT ^ l'VTET UNION ROMANIA: NET ROMANIA: NET ROMANIA

IHjrT ORnSS NAT PPCnCT MATERIAL porCUCT MATERIAL PRODUCT CROSS NAT PRODCT

HI LION HJRR P ^ ILL ICN CURR t I 95 B~ICO 1963 = 100 PILLION CURR f

19 53 35.70J R 8 . S 3 3 - 74.000 47 . 0 0 0 P 10.804 —T"9 r’"V _'7iy5C7t 7 0 2 . 7 5 T ' F 4 . 7 7 T 53 . 7 4 7 " R 11.341 1 955 53.50 ) 117.214 90.000 57.000 P 10.875 1956 106.90 ) Q 1 35.617 8 3.000 52.257 R 3. 174 D 1957 III.8 CC 143.921 97.000 61 . 0 0 0 R 9.233 1953 127.700 ~ir ~nrrT957r roo.uuo 53.000' T>- “ 8 7 4 7 1 “ 1959 I36.2C.3 p 2 0 0 . B04 113.000 72.000 R 9. 594 o 1960 1A5.CC3 2 2 0 . 3 1 6 125.000 79.000 R 10.203 1961 157.9^ 3 R 237.837 138.000 87.000 R 11.100 TVST TSVTS'CT 1 4 4 . 0 0 0 9r.ooo_ R 10.850 1963 169.80 1 277 .oco 158.000 100.000 12.900 1964 1 9 1.300 3 05 .000 176.000 112.000 14.000 196' 19 3.500 331 .000 192.000 122.000 15.000 1366 7 37 .'AO 3' T 6T rrtnr -VT1^*Tntnr#nar«r5r 1 3 7 7 7 0 0 “ 7 7 ' . TOO- 196 1 925.5C3 396 .coo * * + * * 1 44.000 1 8 . 800 I 963 24A.ICO 436 .cco 154.000 20.400 1969 26 7.903 470 .000 1 6 6 . COO 22 . 6 0 0 7 7 7 0 " 7 3T.“9C7' “517 ;coo n no 00" 25 . 2 0 0 *$<(**** **** 1971 3 0 5 . 0 n J 530 .000 200.000 2 9 . 5 0 0 1^7? 313.203 614 .000 *********** *********** 32.900 'S^CE: *f 17 (1563, 15731 ' V19 TTS- 177577“ # ia (1 9 6 Jt 19 73 T~#T9

* = NOT AVAILABLE.

3 = THIS FIGU° F FSTIMATFO WITH A REGRESSION EQUATN OR 9-1SFO C'N F IOIJPES E K T T HAT F Or WI T H -'RE G R ES S I DN~~EQUAnys;------K> CN FO_KE IGrJ DATA ( COl-:T TNUED )

HATE RIAL PR0 PU CT_ GROSS NAT PRODCT MATERIAL PRlimjCT GROC5_.1’AT PRO PCT

blLLIOfJ CURR ZL BILLION CURR 5 BILLION CURR F BILLION CURR f

T T 5 7 ? ^ T r 7 7 7 4 o r TT o c o ff * 7 7 7 7 7 1954 '' 19R.496 R 4.247 " f f ' , 6 0 . 1 R 4. ? a u 1955 223.100 R 10,73? °4.3oO R 5.747 1956 2 52 . 1 0 0 R 12.4F4 82,500 R ‘>,u4/ 1957 301.400 R 15.461 107.300 R 6.5?! 195F 321 7300 R 16. 66? “U T T . 0 ( 7 0 ----- R------6 . 6 P I ------1959 345.400 K 1R.J1F 1 2 H . 2 0 0 R 7 . 7 4 " 1960 375.8 00 R 19.464 142.000 R P.5P4 1961 __ 4 1 0 . 7 0 0 R 2 2 . 0 6 1 lAp.OOO R P ,994 1 9 6 2 4 26.100 R 22 ,991 156.700 R 4.44P 1963 460.ICC 25•30C 165.l^C 9.7CP 1564 497.000 ?6.*>00 173.5 CC 10.4 00 1965 531 .3C0 28.900 170.ECO 10.600 1966 56772710 31T6TV0 17^7700 ------l ' l T ^ m ------1967 605.600 33,700 207.500 12.600 196P 668.POO 37.600 ??4.700 13.400 1969 6°6 • 100 39.7CC 253.1 CO 14.600 1970 749.2 00 43.500 272,400" ' 16.IOC 1971 F55.0C0 48.400 294.300 If. -00 197? 94-7 .100 54.200 319.400 15.300

SRCF: "#T T ~ n 9 6 R 7 ~ r 9 7 3 ' l * T 9 ------m — r i 9 6 T T ------

R = THIS FIGURE ESTIMATED WITH A REGRESSION FDUATN DR Fi A S E D ON FIG UR F S FST I MAT ED W IT H R E CR E SSI f)J. £7 U AT N 5 . m o a : lL> G 3 1267 c : C c f ' *A < i + + , t Q - i s : l C r\io jDso-orMroc ^ c o o o b o o o o o o G C a to or-aicv j-cor'- re r e ir> cr c o + : c r Cl Cl a cCCc fiL OC O e'er 1 *^1 o , G C o : £X 0'«f\i0 rr^r-o,r-ooocoooooo G QC J'>00'0 0 0 b 0 0 0 0 0 0 G —to o r-1—* •-< >r an j->r> ^ r^F-f rvio o^ r >j- 0 *£; >o a> O' O *-« (\) rn c P •-H S ' Z .—i» - 4 ^ ,—i G G < t/1 »—i V-O O i / l _I < x tu i _ i c : _J O o c •—i c ? ^ | c r c c r CL&..GCO C C C f cI * ex. oc ex. a. t ~ “O G > C-4/1 j z s __i r^i — UJ 1 - G l ^ p L LC C Pw' O B O incrjo esc- -otB^, * ■ * * • • ♦ * * •!#»* «, « * # E? < — i fsj <\jrv, rv rn r' 0 'Cf,‘'*r,^ocic^ o c ^ £ — < r G i C t ftP < j r e l-^» r H i _ I L — 1 t - -J IC G c K a ? - c r • t *

>• o G ^ CF O f h- t/‘i »■ ^ re tr -r-o %.»oicc- i ' LL G 'TO trstrr V" (/\ . L t t - G “ • * • « + * • H i - bo o f\t(\i•; *r 1?c* cr o 1 rr- J (\. f»l f fT< 'J" UJ u . G C ' o r >—- U;P cC __ c C! IJ : c i c . : G CX -- fcr o k : . o o a e oc* cr ti. p: cr ex ct ex O f H s : ^ G cf-r ■ •—. i - G -- ^\r> t — L i t * s ' - G >(-iOnr'i7,riri'^^pm o r -V * c 1 PB 'Y f i 'G ■e ■* f ' H * * s: -f ►i T' (> ■ « r -* -K r" c * r S < . r O ^ I F »—i U c r r i f f <*" i r > f i N ■rcr f ■> - r c r or c/4, c_ ' * Ol c « r (u uilTiialt .'1 K'O-^jBI'CiO'C' ‘CCOOKr c i c < .trcco'tr ^c'TC'trcC'v /’ W' o tr

i r i i pact NA T 1 OtiA L _ I K'CQM E_nK.lGIN.AT IN G_ BY -S f_C TD K , ______

YFAR TOTAL INCOMF KANUFACTUKING = AGRICULTURE MANUFG + AGRICLT UT H T (■' - T"TAL -

_ ORIGT NAT I.N&. ______a H D _ +.XDB5 IR______(INCL FORESTRY) ______LKF.G...* BILLION CURR KC8 filLLIOIv CURR KCS BILLION CURR KCr BILLION CURR KG'" PILLION LUFF KCC 56.369 I T 7 ? 2 F ~T's-r?rr- 19 54 122.904 °1 .618 16.34? 1 op.oin 14.894 1965 133.669 96 . 9 67 20.74 3 117.710 1 5. °6 l 1956 133.129 46.316 21.346 ll°.6fc2 13.467 19 57 14C* R60 ______1 Q3_*4.P3____ 21«_47 ? -12 A.,0.5 6 2 1 . . 4 4 5- 195& "149, 15 0' 1(9.123 22.857 1 31 .°P0 17,171 19 59 151.989 113.357 21 .531 134, P PF 17,101 19 60 162,956 118.759 25.64P 144 .447 I P . 644 _____1961,. 172.921 ______1.26 .6 1 9 ___ ...... 24.097. 1 5 2 . 7 1 6 . -.19.30? 1962 175.37P 134.043 21.58 0 163.623 1n.75 5 19 6 3 172.683 129.477 24.286 163.763 19. 120 1964 169.5C7 122.877 2 4.06 0 144.937 r?.5 7( 1965 173.519 128.704 2 3 * 0 111.^730- ,_il»7.t.c.. 1966 ~ 195.576 14?.??3 2P.124 170.46? ?>.] 14 19 67 233.99? 169 .685 31.128 ?on.p 13 3 3.17° 1966 257.797 183.8 07 33.729 2 17.536 40.261 1969 293.717 . _ . 2C6.4P8...... 36.418 . 2 4 2 . °C 6 5 UpPll 1970 312.343 225.615 3 5.18C 260.745 51.651 19 71 327.913 2 37.6 32 3 7.75 0 27 5.682 *2. 3 3 3 19 7 2 345.95? 2 50 . 6 54 38.410 2 69.064 66. 6PF

S.RCE": HZ ( 6 5 7 0 ."73 ) #2~~f 6 5 ,“_7"{ft “7 3) A 2 (65 . 70, 73) CALCUlATEP caY culatep

ro cr> co PAf,r 3 NATIONAL INCOME ORIGINATING BY SECTOR IN CONSTANT 1967 RRTCE5

YEAR TOTAL INCOME MANUFACTURING = AGRICULTURE MANUFG + AGRTCLT 07 HrR = TOTAL -

ORIGINATING __ INP + O0NSTR_____ IINCL FOkFSTc-Yl nrc>.+ a r,3 1 C )

BILLION 1967 KCS 01 LL10 1\ 1967 KC? BILLION 1967 *02 BILLION 1967 K C C FIlLIHN 10^,7 K C f

V t S T ” 1 1 3 7 6?6 70 .769 3" #?34 TfTTTloT - T 7 7 T T Z----- 195A 117.65* 73.53? 2 6 .48 8 ■ “"" ’ ICO .020 17.634 19 5 5 1 2 9 . 7 5 5 61.339 2 9.45? 110.791 18.06? 19 56 136.65 0 S8 #9*, 5 2 f • 7 3 9 117.684 19.006 1957 196.607 C6.1C3 28.915 125,018 21,689 19 5T 1 5 8 . 6 7 4 ' ..... 1 t4 .791 ‘ - - - - " 2 0 ..,23' - 134.314 ?4.36C 1959 168.726 115.221 2 5,427 140,648 2 8 ,078 1 9 1(» 182.922 125 .95f 2 6 . 4 6 4 15 2.622 7 < ■. o 0 '< 1961 1 94.777 137.2 29 25 .696 16?.9?5 3 1 . 8 5 ? ---- 19 62 1 9 7 . SOP 14 3 . G2£ 21 . 2 4 0 .. . “164.268 3 3. ?4f 19 63 1 9 3 * 2 ? A 1 3 6 . 4 1 6 2 4 . 6 3 4 161#050 3 2.174 19 69 1 94 « 3P 9 140.326 2 3• 4 °1 163.917 30.57? 1965 201.04P 149.6 82 14.8^4 169,416 M .6^2 ... 19 66' ? 19. 44 2"' ...... 167.373 ' ” ...... 2?.‘7T9- ■■ ■’ " I f. 6 . T52 3 3 ; 29 0 1967 2 31.015 169.700 2 5 ,°76 195.676 35.9"*' 19 6f 2 4 7 . 6 1 4 17f .930 2 8 .443 207.375 40.? 4 1 1969 265.719 1R9,046 29,73 5 218.781 46.9 38 .... 197G " 280.A2A " _ _ 2C3.465 .....' 2 6 . 0 0 4 ------' 230.269 " 50.155 1971 294.676 214,9 19 27,68 0 2 4 ?.500 5 ?,077 19 72 312. 190 227 .351 28.492 2 5 5 . 8 4"1 c 6 .347

SRCF : H t 'CALCUL'ATED #2V C A l CULATET ' ’' AUCUTAT^O CAL'CULVPirr "C AL’CO l ATFO

w 0'\ M 3 w. rF :u IMPLl C XT GR OS_S NATIONAL INCOME PRICE HFFLATptvS (1967=100)______

YEAR TOTAL manufacturing AGHICULTURO MANUFG 5 A OR I CL T OT h r 7

(1967 = 1O01 (1567 = 100) n o f .7 = jrto) (1967 = 100) {1967 r ICO)

PERCENT PERCFNT PERCENT PERCENT PERCFNT

------r i r ^ r r ------r^ ; z n ------— ----" ’"“"TTT.Vre ...... ------T^^TT.vt)------1954 103. 133 124.607 51.64? 108,226 P ° . « 60- 1955 101.707 119.224 58.77 3 103.5 27 8 9 . 6 5 3 1956 96.156 110.545 61.98? o q . n po 7 6 . 4 6 9 1957 94.851 107 .689 61.971 97.394 105.31? 195b 9 2 .802 1 04 .1 4 3 64.60 7 9 5 7 7 4 0 - "" " 75.07" 1959 6 8 , 9 3 4 56 .391 7 0,663 °3 .452 64.87; 1960 8 6 . 1 9 ? 9 4 . 3 25 80.876 ° 2 .344 66.713 19fcl 87. 193 53 .7 34 7 8 . 2 5 6 91.336 64.554 1962 6 7 . 6 6 5 ' 9 3 . 7 2 6 " 84.78 5 ' 97.314 ' " '63.30)1 “ ' 19 63 88.334 94,922 82,2 70 93.033 6 7 . 2 9 6 1964 8 6 . 0 9 0 87.573 8 5.470 8 7 . 4 0 ? 78.632 1965 85 . 2 0 9 66.050 96,917 87.276 73.337 15 66 8 7 . 5 90 8 7 .6 66 " " 9 8 . 7 1 5 89 . 2'?0“.... 8 ’,. ?51 - “ - ---- 1967 100.000 100 .Ouo 100.000 100.000 inn.coo 1968 102.788 102.7 35 op .96 7 102.217 10*6. 563 1969 109.130 109.2 36 102,204 108.187 1 1 5.29c, 19 70 109.96o 1 10.896 ' 10W.5?6 110.360 104,672 1971 100. ef,M 110 .671 113,3 08 110.690 107.036 1972 109.404 110 .259 112.497 110. 90*; ] o 7 . 6 3 t

SR C E • Ci LC U L A T E C CALCULATEP ~ T X E C U l £TFP " X ' A t X m ’A'TED' ' ... ' C X I C U L S T E P “ ~

-j o ra or- - i

AG RICU LT UKALOAT A: MI $ C l I LANK! U$.._S.F K I £5.

YFAR 7HT AGRICULTURAL

J.ANP ,.(ALL_tYi£51

MIl LIMN HFCTARflS

1 * 5 1 ----- t ;? 1954 7 , ? o 4 1055 7.414 1 956 7.377 19 5 7 7. 1-36 195e 7.3 89 10 59 7.36? I960 7.327 1961 7, ?c 6 1962 7.237 1963 7.213 1969 7.188 1965 7 . ]66 19 66 7 , 149 1967 7,132 1968 7.117 1960 7.103 19 70 7 .69 3 1971 7 » C 77 19 7? 7.f 71

FRCF: ' *2' XLZ \ XLZ PACE ?“

CAPITAL .STOCK: NEW DEFINITIHN, "BASIC A S S ETS'*

YEAR TOTAL BA^IC INDUSTRIAL CONSTRUCTION MANL'E ACTUR irio

ASSETS BASIC ASSETS BASIC ASSETS ASSETS=IND + cs

BILLION 1967 KCS BILLION 1967 KCS BILLION 1967 KCS BILLION 1967 KC

1953 K R 236 .69* R 9 . ? 4 7q K 248.14 1 1954 R *20.?0R R 2 50,3 5° R 10,0*4 " 2 f 0.40 3 1955 647.752 260 .617 10.8 80 271,497 1956 R 6 7 5 . 1 3 9 R 2 7 0 , 6 % k 11.698 R 282,5°2 1957 R 9 06 .6 76 R 283.253 R 12.5 99 R 294.863 1 9 5 8 "R" 939.152 "R" "295 • #57* R 13.5 ?TJ R 3 0 ° ' . 2 7 0 1959 R 979.76 5 R 312.42° R 14.487 R 326.9 16 196C 1021 .150 328.143 15.412 3 4 3 . S 4? 1°61 R 1066.620 R 346 .01 1 R 16.519 R 36 7.575 1962 R 1110.400' R 363. %3 R 17.503 R " 3 8 1 , 4 4 6 1963 1153.530 383.101 18.425 401.526 1964 12 OJ.580 405.382 19.455 4 2 4 . 8 3 7 1965 1291.920 420.701 20.303 44 1 . 0 0 4 1966 12 66" .430 436 .428 ' 21.2 6% 2 7 5 7 7 7 9 7 1967 13 2 6 . 4 6 0 4 5 2 . ° 2 4 22.137 475.061 1968 1374.65o 4 7 1 . 7 2 2 24,821 4*6,^4’ 1969 1425.820 492.282 27.247 510.529 1 9 7 0 1499.350 5207372 ' 2 9.'2 5 2 " ■549. 6 74 1971 1573.270 5 4 7 . 7 7 6 31.494 57°.26° 1972 1649 .Rio 575.162 34.441 6 f 9,603 "S RCFT9731------W Z ~ m m ------T 2 n9T3~7------V2 Tl P7TT

R = THIS FIGURE CS TIMA TCP WITH A REGRESSION EOUATN OK BASED OH F IGUR E S _E ST IM A TED W ITH REGRESSION EOUATNS.

—j i\j BASJ.C_AS_SETS .JCOIlTJNUE D)

YEAR AGRICULTURF 13 A SC OTHER RASC ASTS

JLINCL. F O R L ASTS... =TOT AL-fMSG+AG }

blLLION 1p6 7 KCS 3TLLTHN 1 ^ 6 ? KCS

55TRT53----- R 4*5 j. 6Trs 1 4 5 4 R 57*F9P K 5 01.905 1955 63 .594 512.661 1 9 56 R 65.381 k 527.165 1 *? S>7 k 69 ,144 R 54 1.729 19 58 R'"" "73.143 " “R‘ 5 5 6.740 1959 R 78 . 5 4 4 R 574.3 26 1*»6‘T 6?* 66;i kt-4,975 \9trl R 90, CU k 6 1 4 . 2P0 "1962 R" 94.421 ‘ K '6 34.535 19 63 9 7 . 1 5 7 654.849 19 64 1 02.623 6 7 4 . 1 2 5 1069 107.441 693.476 1966 108.28 5 710,4*1 19 67 115.189 736.228 1968 120.197 767.907 1069 125.23? 7t 1.055 19 70 132.35 6 81 7.'3 70 1971 139.571 8 54.43? 1972 147,126 P93.063

" SRCr: (19T3T~ C ACCULXTEfi- R = THIS FIGURE ESTIMATED WITH A REGRESSION FQUATN OR BASED ON FIGURES ESTIMATED WITH REGRESSION FOUATNS D A0E Ir

^ lated r f r i e s : c a p !t ,m s t rc k ; c m ocriMiTinN. p r o d uctive basic f u n d s

YC \R TOT M < P P T r r OF Ft. I .INDUSTRY(DRICF I I .CCNSTR(PR ICF III.AG &FC«I PRC E

1 947-55=,9?7 ) H F FI 67-5 5=.368) OF FI 67-55=.9C9) J7EF\ _£17-55=„9i7J

0 ill ICV 196 7 KCS BILLION 1967 KCS BILLION 1967 KCS BILLION 1567 KCS ------[Ill" IteTTos ------16757177------' 5 7 5 ? ? ------R -----2^ 733 ?) 691.130 180. ‘3 17 5.598 R 48.648 9 '3 3 617.117 190,178 5.740 54.601 ,9 56 643,06 3 199.9 04 6.013 57.961 6 73.767 217.486 6.698 62.581 [95 3 7 2 6 » 6 3 j 226. ?.r>7 7.508 67.620 .050 746,797 243.90? 8.621 74.341 ,;16T 7 10. 143 261.994 9.926 80.979 19 51 fjOfcj C2 5 .._ . _.?3l * 2C O _____ .1,448______...88.619 .. L 9 4 2 t? *? 0 . 7 1 2 3 01.475 .2.700 94.101 L96A 933, 369 322.494 L 3* 526 98.859 L9S4 972.84? 347.762 4.435 103.650 , ?6 5 1018,41? 3 6 8 . 3?c 5.643 109.223 . ') 6 3 ' 1 C 4 ? , 7 S 1 393.324 7.195 110.909 .13 7 1 108.041 413.346 .8.647 116.052 . 36-3 V 't * * t- *• V- # * * # ****** r**< *1 ******* ****** ***** 9 SI * ^ -I * -Jr * * * ^ * * * * * ******** V********** *********** .9 7.) S',*!;:******* *********** *** *** ***** .171 J|: i: * -* S Vt * ■* # * * ft * ft A *********** *********** 19 7? l1 * r: * ft ft i(r r. * a *********** *********** ***********

5 < L “ : T 2 ^ ( T 9'£ 8 } T 7 'a LT4TJ ' if"? ri968) ST, 7 ~ n ‘9' S 8 7

------_. ... _. ------.. __ -- ■ — — — -- — ------..... — * - NOT AVAILABLE.

D - THIS - rni't-'F FSTIKATFD WITH A RFGR r S $ ION EQUATN riR T?^c^r^rrnx]prs -4 ANNUAL AVFRAGf EMPLOYED POPULATION: bY SECTGk

YEAR TOTAl EMPLOYMENT I. IN DtJ* TRY II. CONSTRUCTION

IN _N_AT IONA L _fC *,..

THOUSAND PERSONS THOUSAND PERSONS THOUSAND PERSON'S

195* 56 f j*000 T RXhTTiTH 7;c7,~^W i

1954 58 5 0 . OcO 1411. COO ' 404.080 " 1955 59*^6 * 000 l t*47.CC0 4C4.Of 0 1956 6047.0 00 1 94 <,.000 426.*03 hi00.000 7 67 5.000 4*5. fl .ono 1957 -Afr;rrrnr - 195P ---- U 1 5 . 0 no 2 r,9 c .nnrr ' 1959 60 58 . o 00 2 150.000 446,000 I960 6063.000 ?76 3.000 5C’l . 0CD 146 1 6 1 54,000 2 3 35.000 521 ,oro 1 962 ’ 6 2 6 0 .one 2 A 0 9 . C C 0 5 2 0 .D O ’ ” 1965 6311 .0 00 24 11.000 5' t4 „ OOn 1464 6 3 7 4 . 0 0 0 2 ^ 3 7 . onh 50R.non 1965 64 7 7 . 0 0 0 2 4 p o.f.r-D 5 2 1 . ooo “ 1 966"..... “OFTCS.O'CO ‘ ' 7 54" 9* OCO ------34T. 7 0 G ~ — 1967 6686 , 000 257C.OCC 557.000 1966 6 7 9 4 .GCO 2 605.000 5 76 . r» f>0 1469 6 9 1 9 .000 ? 6?6 .000< 5 8 5 .000 1970 “ 7 0 33.000 "2 670.000 ‘ “'605".non 1971 7115.000 2 6 44.000 6 2 4 . OOn 1°72 7174 . 0 CO 2 35 5 *000 6 39 . C 00

SRCE S“ r 2" ( T 9 6 F ” 1' QT^ ) ~ ~ H Z " ( 1« 6Tlr737— V 1 T>7'?')------275 V A C'T AN NU AL _A V E R A C-E EMPLOYED POPULATION: ^ hY SECTOR ( CONT . )

YEAR III. MANUFACT. IV. AGRICULTURE V. 7THFR

______( IJiCL . FORESTRY) = T GT&L- 11 T ■*■ I V___

THOUSAND PERSONS THOUSAND PERSONS THOUSAND PERSONS

r e s 725z77i?7U "" lftSf.iV.A ----- ■■■ 1 954 2 3 2 0 .OCC 19g?.ooO' 1533.000 1955 / 3 * 6 .000 2C27.COC 15 83. CTO 1956 2 4 2 0 .000 19 9 6 . 0 0 0 1631 ,o m 1957 2513.OnO 1°2 1.000 1666.000 lP?fi“ Z F 6 2 . O o G IE 8 6.0 (ED ~ 16 8 fT.TiOo 1959 2 6 4 6 , 0 0 0 172 5.000 16 87 .000 1960 2 7 6 4 . 0 0 0 1 570,000 1729.OCO 1961 26 56 .000 148C.D0C 1 823 .0 00 1962 '2929 .000 1 430.000 “ ' 1"892 . f'0 3 1963 2917 .G

YFAR TOT rCONnMICALLY AGRICULTURAL NCINAGRIC UlTJRAL ACTIVE PI>P.. LCLFLJJTLCL. .FORESTRY) _LMANU.F«. £. OTHFR) THOUSAND PERSONS THOUSAND PERSONS THOUSAND PERSnvlS

TW 6 016,000 2t'7P,oH7 _... 3.9” 7 u u u 195A 60PA .OCO ?C36.jOC AOAR.000 1«5P 62 56,0 60 2115.00C A1A1.OCO 1956 6357.000 2094.GOO A263.900 _1 95.7. ______C’Aje t00()______...... 2 6?7,no.c) ____ A391.000 1955 6 937.000 1 9RO,nr-0 4457.9 00 195 9 6306 ,0C0 ISA I.000 4545 , *.<00 I960 6396.OCO 1 <*5.vCO A711.COC 1°61 6603 10 r'0 159P.0CC A9C6.0C0 1962 6 593.0 00 1 554.000 5 0 39 . nn-j 1963 66 ?n .000 163 5.000 5095.OOO 1964 t679.000 1 On 3 .00.0 5176.000 1965 6770.000 147 5,00 0 5295.000 ' 1966 6690‘ .000 1465.COO 5 A 22, oo'o 1967 6O6A.000 lA39#CCr 5515 .000 196B 70Afi .uOG 1A1A.OOO 5 634.9 00 1969 7160.000 1399.000 5761.000 1970 " 7261.000 1 39 0.n on 5P71.non" 1971 7337 .000 12 32 r 00 0 5955 .0 00 1°72 739^.000 135 6.OCO 6036.COO

- — - SRCE: " #6“' ~ * 6 PAGf-' DEKOGRAPHY: MID-YEAK POPULATION; RUKAL AREAS - PLACF^ UNDER 2COG INHABITANTS

YEAR TOTAL p op ulat ion RURAL POPULATION UKPAN POPULATION POPULATION a g c WORKING POP :w POP

MIO-YlAR{POFJUL) MI D-YEAR MID-YEAR 13 ANn nvcR (AGP 15 TP 64)

t h o u s a n d persons THDU SAND PERSONS THOUSAND PERSONS THOUSAND PERSONS THOUSAND PERSON?

1953 T777o.7if>rr “R FFfT? t . ft f 7o T7 " f - 1 2 9 5 2 . 0 0 0 "R ' 60 23.9 99 R 6 928. C X I " ' ' 5925"* 000 R 8360. (>59 1955 1 3 0 9 3 . 0 0 0 6115 .9 91 6 9 7 7 . f7C 9995.000 0424.COO 1956 13229.000 R 5968.0 31 R 7 2 6 0 . 9 9 9 9 5 7 9 . ono f 4 7 6 , 0 0 0 1957 13358.000 R 5937.980 ft 7**2 0.531 ® 6 5 3 .000 8534,OOC 19 58 1 3 4 7 4 . 0 0 0 K '5"9DJ ."770 k ' f i t 0.7i0 ' 9 76-5 • AO O E'6O'2.'O00 1959 13565.000 R 5862.125 R 7 702.875 98 39 *000 *6fcr- . OOP lOpG 1 3 6 5 9 . COO 5923 .510 7730.C90 9936.0 00 8 73 2.POP 1961 137 8 0 . 0 0 0 R 5 7 E 6 .9 F8 K 7 501. Cl? I COC.3.0CO E 8 2 ° • C 0 C 1962 1 3 8 6 0 . 0 0 0 R ' 5799.7 70 " K “■ 8115.230' *■ “ 1011-1.000 f 917,OOP 1963 1395 2 . 0 0 0 k 5703.898 R 8 24P.102 10315.003 9fX9.DOC 1969 19058.000 k 5 6 6 6 .9 10 R 8 59 1.050 10995 ,0 9 0 3 9 , OOP 19 65 1 9 1 5 9 . 0 0 0 5557,3 20 8 60 1 . 6 PC 1 0 5 7 2 . noo 9164.COO ' 19 66 ----1 424 C’. GO CT 5552T797? "K‘ ""8f.^57DT8 ----- ix^ t d v o ^ o ------erp-a o y o o o 1967 19305.000 R 5508 .3 51 ft 8 7 9 6 . 6 0 9 10820 .OCO 9 3 0 6 . GOC 1968 1 9 3 6 1 . 0 0 0 K 5965 .020 ft 8 895.980 109 34 . ri 09 9- 6 P ,000 1969 19915.000 _R___ 5918.991 R 8 5 9 6 . 0 5 9 R 11063.000 9 36 8 .000 — - X 9 7 0 ---- 19339.000 ' 5 3 9 9 . 2 7 0 B 9 8 9 . 7 3 0 11132.000 0 4 1 0.000 1971 19907.000 K 5330.199 K 9076.801 P 11273.OCO 0 44 J.000 1972 199 81 . 0 0 0 R 5270 .51? R 9 2 1 0 . 4 R * R 11413.OCO 05 27.000

SRCF :-# 2 T ~6------#T 1 ' TTAXC'‘JL7TED ------7 T 0 ...

R = THIS FIGURE ESTIMATED WITH A REGRESSION EOUATN OK BASED ON FIGURES ESTIMATED WITH REGRESSION FOUATNS. 278 page

0E Mf|GR AP H Y : YE AR - E ND...Pp PUL AT 101- J RURAJ, __AK E A.S._ = _ AC r . S UN DIP ?0QO TNUA ?XT_A,^.7i

Y FAR TOTAL POPULATION RURAL POPULATION UK RAN POPULATION

_ .YE A R rE NO.______Y P A R- ENp______YEAR-EUP ______

THOUSAND PERSONS THOUSAND PERSONS THOUSAND prRCPN' ----£— T « ? "R"T K “ 4 5 ^ 7 7 ^ ' 1954 P. 13022.10? R 6' -0 ] . 64 P R 7 0 20.449 1955 131 6? . or-f. 6 ] ? ? .000 7040 ,non 1956 R 1 3292 *( CO R 5 °? 3 » 949 R 7 3 6 B .051 1957 R 1 3 4 1 7 . 6 9 9 ...... kR . 5 F P 5.64 9 K 7 53?.2 60 1 95 (TR 1 75 3 0~. 6 C 1 5 847.461 R 768 3"; 340“ 1959 K 1 3 6 1 9 . SCO R 6 P U . ? ? n K 7Pu9,1 K> I960 137 33 ,Oo0 5 F4 7 . 000 7 P F 6 .000 1961 R 1 3D 2 9 . 0 0 0 R 5 73 4.809 R ^0 0 4 .I*] 1962 k 1 3 9 0 6 ,P98 R 5697,961 P " B?OR.941 1963 R 13906.60? k 6 66 0 . R C 9 R R 335.7P9 1969 K 1A.C99.P98 R 6627.ico R P476.7P9 196 5 14194 ,f..00 5 6 39.W6 0 .f 6 66 1000 ~ 1 966 “1 4 2 7 1 . 0 0 0 " 5 001.000 B 7 7 0 . 000 1967 14 33 3 .000 c 4 ft 6 . OO 0 0 ^67 . <700 196B 143 69,000 5 492,000 0947.000 1969 ] 44 45 ,0 00 56] 7 . t DO « 0 ? 3 .000 I 97 C 1 ^ 3 6 6 , OCO 5 414.00 0 P 9 6 ? .000 1 971 16436 .000 c 41 3 . OOO 197? 145 2 6 . 0 0 0 6 37 5.000 9161.000

" SRCE:~‘#IO a lb"...... ErCCTJtATcD R = THIS F1GURF ESTIMATED WITH A REGRESSION EQUATN OR EASED ON FIGURES E STIMA T r.P W IT H_ RECK Ec SION EJUA T N S, 6 U rn MOGRAPHY: .TOTAL .rtOVEMENT.. 'SRCF: 'SRCF: RM SSK FROM r m 981. 296124.193 9.611 82 14.5 18,085 1968 1962 ?? 1956 9 19 195 5 ER RIA? I S ARRIVA YEAR ARRIVAL?; INCSR 901.3 .7 23.7C8 9.570 14.138 17.937 1970 1969 19.643 1965 1464 1963 1961 lc5o 195? 1955 1954 1971 196 7 1966 18.8 I960 921.7 .3 18.506 7.535 10.971 1972 thousand i " ril ______OF..JiEnP.LE.^.E.TJiF£.N 334 _ 13,314 4 0 4 , 7 1 19.0 96 19.0 29.087 T T T 7 T V 678 28.27? 81 26*7 18."4 94 21 .2 51 13.155 17.9?? .867 P I __

.626 .101 ______persons 68 ... .

FRQM-.LSR d n a s u o h t T Y # " ____ , .REEU&LILS 53638.01? 15.386 1 4 9 0 11. 0.180 8 1 . 10 43 » 467 10.196 11.098 1 19.380 11.6 10.926 10.699 11.684 12.356 12.370 l

^ 0 9 . c 8.407 1 N < TTL MOVEMENT TOTALS IN S

______.86

e sons per '

8

6 6 ______.... ______...

ETidN3 SSR C CSR d n a s u o h t ______D E T A L U C L A C __ _?9 . . m L T S J 21.56? 31.471 30.961 ? 29.420 25.836 5129.9 ?«. 29.179 33.607 29.966 23.217 55.053 8

l . persons 7"*4 0°0 102 PACE 4f o ro CD i'age: a 7

DEMOGRAPHY : TOTAL J5IVE/_ENT__0F; „PF_QPLE_6_FTwr IN , QRFCF . KKAJF, OARfSY

YFAk WITHIN CSSR WITHIN CSR WITHTN S5R

THOUSAND PERSONS THOUSAND PERSONS THOUSAND P<“R4rvjr

r « s r K * - 4 T 7 7 l 9 T “ R rn?i.74T 1°54 R 637 .6F3 R 464.605 ' ‘ ‘ rf 11P.07 5 1955 R 516,573 K 38 0* (' 6 6 93,0 40 1056 R At? .7C4 R 34 1 . P 11 R F7 ,791 1967 R 3C1,331 R 29 1,507 a 65.963 “ 1'9 Sp ­ R~ "402 .FP3" ' "29p .?:b 2 7 ? n T ^ iffs 9 R 4 3 2 .?6P c ?17,3?1 k n.7?o I960 R 371-1 11 k 2 7 0 . 9 c.o a 70.166 1961 R 3 ^ 7 . 4 6 2 R 267.270 h 71.102 196? R .. 374.397 R 77C , 66 7 R "74V351 1963 R ?F 6 ,497 R 2 7 r . n o R 73.7 39 1969 4 05 .5 71 289.593 F 6.0 27 1965 3f l ,0 39 7 69.746 ° ? .4 57 “1966" IFF.407 " 276.1F ] F?\"F06 " 1967 3 F 2 .0 66 273.26? FO. 601 1968 2 67.7 46 ?5?.?16 9 0,757 1«69 35?.714 251.772 78.7 25 197 U 404.4 OF 28 5.466 ' oc .234 1971 392.71? 276,940 44.710 1972 357.372 ?6 0.214 88.6 5?

SRCE!"#7“T1'97CT-mTT' "*2 ( T97C i~Tc737— ^TTi CALTULA TE T ~ K = THIS FIGURE ESTIMATED WITH A REGRESSION F7UATN OR EASED ON FIGURFS ESTIMATED WITH REGRP SS ION EijUATNS. 192 1 A ‘a? 4 (

_NBTURBAN IMMIGRATION - ARRIVALStFROM ALL PLACES, INCL OUTSIDE C S ? k ) -PE PAR T!.'KF f

VCA k ARRIVALS IN D fRARTURF S FkCVt NFT URBAN

„ ^.URBAN_ARr__AJ- ..U R ? Aftf., AR t A.'-______D M T ORATION THOUSAK'O PERSONS THOUSAND PERSONS THOUSAND PERSONS

k K 2 ft 1 * 11f . -ToTFFo 1954 k 2 m ? .833 R 311.3ft ft k -42.5 55 1955 2 75 *6 97 ? 6 C . 186 15.511 1956 k 264.757 K ;?7.5?o ? 7 . ? 4 8 1957 R 2 6?,.? u6 k 707^451 •\ ...... 5.5^7 55. l^se ' R ?i? .146 R ‘21?.6?3 R 49. '!?? 1955 R 1* 2 .3 07 R 22 5.37 6 R 36. 9 31 I96 0 ? 6 6 ,07ft 197.56^ 68.515 1561 R 2 61 .C 49 R 106.*,36 R 64.613 196? R 261.6 5? K 199.647 k 62,006 1963 R ? 61.7ie R 705.052 k 56.665 196 4 R ? 61.156 R 713.189 R 47.967 156 5 2 57.2 24 702.1PP K6 .0 36 1966 1< 7 54.534' K 7 0 6 , 8 P ? ‘ “ R “ ‘52.65,?' 1«67 R 2? 0 .925 R ?Cfc.l?l R 54.794 1 96 P K 26?, .0 6° R 19 4 „ •+ 3 ft R 6ft,4?4

1969 R 2 65.170 R 194.774 . k 70.396 1970 ? 74 .? 74 216.447 6 7 . 0 27 1971 R 276.781 R 212.29 4 k 64.4P7 1972 R ? 7 6 .797 R 196.777 R 80.019

S RC F : "mti 11...... 411 l“ACCOLA'TET.

R - THIS FIGURE ES Tl MATED WITH A REGRESSION FQ'JATN OR BASED ON FIGURiS ESTIMATED WITH RE GRESST ON .C.-JUATMS. pace 44 NEL KUkAU._.I.N«I-GRAUPN..= _Ar

YEAR ARRIVALS IN DEPARTURES FROM NFT RURAl

RJLLM LJ & E A £ ...... RUKAL-AAEAi______INrilGRATI

THOUSAND P FRSONS THUUS A.VH PERSONS T H O U S W PERSONS i 1 id 1 . I S ^ T r ---- _ i T _ . 7 7 4 . yt7~ _nr. t 1^54 R 315,144. R 267, q e c R 51 .214 1955 237 .526 254.05? -16.527 1956 R 201.831 R 240.247 R -38.416 1 95 7 K. 155 .196 _ __R 229.E2C R -74.674 1968 R " [ 59 .8 96 R 22 1» 2 6 1 R -61.466 1959 R 75 .708 R 216.654 ii -40.°81 I960 37.159 20 7.2?? -70,074 _ 1961..R____ L3.0_.6fcl___ _ R. . 202. 346 „ . ...S -31*665. 1962 R L3? .568 R 199.340 R -66.77? 1963 R L 3 7 .6 58 R 194.516 R - 66.8r 8 1964 R L 4 7 . 0 74 R 197.572 R —40.498 J 96 5 26 184.527 .?« * 1966 K 131.5 49 R 17f .23 2 R -44.4?? 1967 R 125.251 R 177.497 R -52.246 1968 R 07 .782 R 178.124 R -70.34? 196° R 102,8 35 R 179.05 5. ___ R -76. 219 .... 1970 L33 *3 9R 200,0 3 2 -66.6 34 1971 R 22.194 R 198.479 R -76 .285 1972 R 97 ♦ 8 59 R 196.783 R - 98.524

Sfc'CF:"?!'!™- " " " i ' l T " ' ' C ALCUU TED R = THIS FIGURE ESTIMATED WITH A REGRESSION EQUATN OR BASED ON FIGURES ESTIMATED WJ T H r r G R E S SI F.UUAT.N 5 ♦ 263 d e m o g r a p h y ; alt e r n a t e measures of participation

YEAR TOT PARTIC KATE WORKING PARTIC AVERAGE 4 WOMEN PART RATE-WOKEN

- CLF/POPJUL RATE = CLF/WPnp [MPLHYFP = EMPL WDMO/WPP!

PERCENT PERCENT THnU$AND PERSONS orRCrNT

■ V t l T 4 6 . 9 0 0 ft 7 2 . 4 0 4 p --- 1954 47.000 K 72.800 R ?263.000 R 2 8 . 2 6 4 1955 47 ,RC'C 74.^08 2 553,000 3 0,300 1956 48.100 75 .ICC 2 5 50 . 0 CO 29,849 1957 48 .000 7 5 , 2 4 0 2* 6* . orn 39, 03-* - jqsp ------47VP00---- 74>f0f - .... - 2^7,0 00 ^P'-RA? 1959 47,100 73,740 2 3 60.000 ?9.4]C 19 bO 46 ,POC 73.200 26 08 . GOG 29.8 67 1961 47,200 73 , 7 0 0 2 6 9 2 . one 30.49 6 1962 47.600 " " 73 .9C C 2 7 2 8 , COO " 3 2 V 7( 6 1963 47.500 73,600 27F?,0 00 30.841 1964 47.500 7 3 . 9 (' ( 2 8 4 8 . OCO 3 1.508 1965 47 .8 00 7 3 . 9 0 0 2917,000 31.831 "T9 6 6 ■**46V4TrC" 7 4 . 6 0 0 " " " "2907.-OTTO- ' .....3 2 . ' 4 3 9 .... 1967 4 8 ,6C0 7 4 , 7 0 0 3053.000 32,807 1966 49 ,1 OC 75.20C 3 1 41,000 33.62° 1969 49 .700 76.40 0 3211,400 ^ 4,?76 “ 1970 ..... 50.700 _ 7 7 . 2 0 0 3 2 6 6 ."0 0 0 ..— ~ 7"4.Q’2r 1971 50 .9 00 7 7 , 7 0 0 3 3 4 6 . 0 0 0 35.441 1972 51.GOO 77,600 34 00.000 35.688

* SRCr: CALCULATED"---- CALCULATED" “ " 7 7 , 4 1 6 CATCULATEP ' " " R - THIS FIGURE ES TT MATED WITH A REGRESSION 8QUATN OK BASED ON FIGURES ESTIMATED WITH REGRESSION F7UATNS, P A V 5 1

AVE K AGF . ANNUAL K AG E Fi I LJL _P Y.„SSC.T_pR__A. V L ANN UA L_WA BEH AVE ANNUAL fY r-L HY OF WT )

YFAK I. MANUFACTURING II. MFC, KGE RILl III. nTW6R WAGE IV. DTK WGF MLL

KA GE °IL L ______P EF L: „ G N Y T . YF G JiJ L L______n EE.LJ__ ON Y_j__T'7 H

EILLION CURR KCS 5ILLI0N 1*67 KCS flULIHN CURR KCS SILLint; 1*67 -

------T 5 T 7 2 F ------T ^ T ^ T ------J 1 7 T Z Z ------1*54 35.6*1 28*643 ; 1 3C ' "2 4.0*4 1455 36.598 30.6*7 22. 793 2 1956 38.993 35.228 29.906 3?.3?4 1957 90.6 20 37.72 0 2 5.3 7'* ?4.0 9 a " 19 5fl 9?~.550 90 .85 7~ ~ "2 A . T 2 ' 5 ~ ' 37T* 9 ? ' ? 195* 95 .802 95.52 5 2 6. ‘US * 1 . *» 18 196't 58 ,293 51.1** 28.321 5^.rc6 1*61 51 .339 _ 59.77] 30.5P^ _ 97.376 1962 52 .863 5 6 . '*o? ’ 31.*95 S o . 50.6 1963 52.506 55.31* 33.393 52.678 1*65 59,866 62.652 35.573 46.290 1966 57.53* ______6 6 j 7 :.l _ _3 7 . * 0 3 ______51.657 " 1*66 60".6’63’ ' " 6 9 . 1 9 8 ' .... ~3'° . ?'29 ' 5 c ;4 v 1967 65.316 65.316 5^.220 93.229 1966 69.626 67.773 48.363 9 5.?6‘5 1969 74.636 6P.32t_ 54.415 _ 67.1** 197C 78,954 ...... 71.197" 57.436 52.467 1971 82 . 9 7 7 74.9^6 6C.9?1 56.*17 1972 88,0*1 79,8**: 65.888 60.742

SRCE: ’CALCULATED ------CALCULATED" "CACCJCATTD CX lXUL'ATTP ; g z G 1A0P

AVERAGE ANNUAL VAP.F_Ll.LL_ILY.JE.CICa JCONIIHUEI lL

YEAR V, NHN-A GRIL PERLFNT DF 701AL VI, NHN-AORIC P OR CENT Op 1!

-- WAGE BJLLL=_L+.LI.I__S CUKfLJCC5.l t L>J__VAG£-ZI_LL=n>_lV LL9A7..KC9 «

P ILLION CURR KCS PERCENT BILLION 1967 KCS PC R CF NT

1 ^ ? fiC F rc V^-.IGX ^ a 1954 57.321 74.38 6 5 2.687 c7.O40 1955 59 .393 7 3 . 1 1 0 56,123 60.161 195fe 63.349 72.520 67.567 1.9 5.7„______6 5.9QQ,_.... 73..1L0 6 1 .Pin 61.2 65 1958 68 ,775 7 4 . 5 4 c 75.790 ✓ 7.581 1^59 71 .6C5 75.96^; 86.852 7? . 0 2 P 1960 76 .6 14 78. r'l it 94.297 78.4^4 1961 61,922______P C . .090 ..... ____ 1 0 2 ^ 1 4 7 ______7.9..691. 1962 84.808 8 0 . 0 6 0 106.867 PI.627 1963 85 ,8 49 80.91C 107.9 03 81.435 1964 9 0 . 4 3 9 80•?cC 107.992 PI.586 1°65 _ _ 9 5 ^ 2 42 __ .81.62 0. 118.29R P4.24 5 1966 100.387 81 .6 of. 110,636 83.71** 1967 107.5 36 PI ,9?i; 107.5 36 e i .92? 1968 1 17.989 8 2 , 0 1 0 1)3.157 81 .221 I960 ...... 129.051 . _ __ 82.270 ______1 1 6 . 5 2 0 ______. _e.D.?.zi 1970' 136.390 83.02 0 123.663 82.92'^ 1971 1 A? ,8 98 83.480' 131.894 84.08 1 1972 152.979 fi 4 . 6 4 0 140,237 p i .940

SRCE: 'CJLCOTATFD' ~CALCULATrD " c x t m m n CALCULATPr M G E c-?

AVERAGE ANNUAL WAGE __BT_LL_PY_f=CT_TO JCONTTNUPPI

YEAR VII. AGRICULT'JRL P FR CFNT OF TOTAL VIII. AG WGF GILL PERCENT OF TOTAL

WAGERTLL______( CURR KCS: *_I X}___P E F L.: GNY. AGR (1467 KC^: X )

PILLION CURR KC< PERCENT PILLION 1967 KCS PERCENT

u T T r r r ------t /.g a s 1954 19.745 2S.62'* 2 P. 2*4 ' 4 2 , t.6? 1955 21.843 2 6 • P c < i 37.163 3 4.834 1936 24.000 27.4P0 3P.721 36.430 195 7 24.228 26.Pe-0 39.096 38.745 195S------23T489----- ~ ~ ----- 7 5 . 4 6 0 ------~ 'TOT? 57 7 7. 41 c - * 1454 22.66 7 24.C4C 3 2.07 0 26.9 7? 196 (- 20.469 21 .441. ?6,<-?7 21.r6' 1961 20.371 14.91** _ _ 26.031 ?0.?r-4 1962 ' 20.394 19.390 24.0 54 If.273 1962 20.255 19.iTOu 24.620 If. 564 1964 20.613 18•71 * 24.351 IP.414 1965 21.441 1P.3P( 22.123 15.7** 1966 ‘ — ' 22.7F3 ------'Ift.'EOO"" 237OP0 "“T6.7F* 1967 23 .72? 1F. u 70 23.72? IP.077 1968 25.0 91 17.940 26.164 1P.77<> 1969 27.007 17.736 27.207 ' 1970 27.89? 16.4PC ?5.466 17.077 1471 ?P.'*P4 Fo .r 2 0 75.0 20 1^.9 4^ 1972 27.472 16.46. 74.066 lr-.06f

SRCE CAl'CUCATFD------XALCUL A TED- C AXTTJL'A TF T CATCU L" A TF P "

i\5 ’ Cv -J W,';r

AVER AG £ ANNU A L _W A _G FJ5 I LL : TH1AL______

YEAR IX. THTAL WA GF X. TOTAL WAGF XT A LTFRN47F TWB

______BILL = V + VII BILL = VT + VITI = IX PFF L IGNYTOT

BILLION CURR KCS bILL I ON 1°67 KCS BILLION 1967 KCS

r=F3------7^ 7 ^ 3 5 ------T?i76i~------r r ^ T s , ------1954 77.066 9? 1 74.725 195 5 FI.226 9 3.28 8 79.8 7? 1956 87.349 106.288 9<>.p.41 1957 50.218 IOC.906 c5.116 195 8 9 r . “7Y.‘4‘ lTr/147 997421 1959 94.272 UP.93C- 106.002 1960 97.583 120.224 ll>;.64o 1961 1(»?.29? 128.178 117.TIB 1962 “ 105.20? 130.521 120.004“ “ 1963 106.104 132.613 120. 1 16 1964 111.25? 132.29? 129.227 1965 116.683 140.421 136.937 1566 12? i 1 TO 1477716 PPJ79T2 1967 131.258 131.25P 131.25R 1968 143.880 139.321 139. 07 ft 1969 156.858 142.728 143.735 “1970 164.28? 149.129 149.394 1971 172 .382 156.922 1 56,505 1972 180.951 165.102 165.307 “SRC'ET* CALCULATED------CAUCDLTTTD'------C4UCUU4TTD------$ 0 G PAGE 5 5

AVE R AGt ANNUAL . WAGES (E*C LUDIM/. *PPKDNtTIX = r ) ._=.. .12_*_IAXE RAGE MONTHLY-.HAGL.)

YEAR SOCIALIST SECTOR MANUF (t-ROM MO AGRICULTURAL WGF ______LP£0 AX;. XT HER.) _M.G_.il —E/ME G..XMP.L.)., tXXCL. FQ.REST.RY 1..

THOUSNP CURR KCS THOUSNP CURR KCS THUUSNO C'JRR KCS

T ■ T T T T t z r — ------. T _ .“ *7757 1*59 1 9 . 0 6 9 15.369 9,012 1955 19 .9C0 15.600 10.776 1956 19.969 16.092 l?.n?9 1957. 15_,22f? ...... „ 16.169 ...... 12.612 195 8 15,569 16.608 12.688 1959 15.GPP 16.93? 13.190 I96 0 16.360 17.972 1“* .856 19b 1 ...... 16,776 . . . 1 7 . 9 7 6 _____ ...... _ 13.769 1967 16 .8 89 18.098 19.17? 1963 i6.°oe 16.000 1 9 . 2 9 9 19b 9 17.972 1 8.629 19.^52 1965 17,. 91.6..._ ...... J9.i.l9t’. 15.696 1966 18 ."7T0P 19,68? 16.752 1967 19 .916 20.56 8 17.786 1966 21.000 21.868 19.769 19b« 22 . 5 6 0 ... 23.299 ...... _____ 21.9 56 197 0 73.299 29,108 21.67? 1971 29.1 08 2 5.00 8 2?.9?° 197 7 25

" S RC r : ' T 2 ' t (Ta x C l/LATEO "" #? V "LA'iXu L ATT D / ? 7 C'AL CU'L a TED'

r\3 CD V£> raof 6 t- Aye RAG E ANNUAL REAL _ W A_CE S : 1 ^ 6 7_ KC^_*

YEAR SOCIALIST sector MANUFACTURING AGRICULTURE

(DBFL-.. GiNY tO T H i (PEEL :_GN_Yj VF_G)__.IT ?-L:- GNY_, a OR )_

THOUSND 1967 KLS THOU? NO 1967

T ^ 3 T — T T 7 * m ------T 3 7 7 T r ~ ~---- 1954 15.654 1 2 * 3 4 6 19,194 l fc55 16 .0 6? 13.065 18.375 1956 19.8?8 14.557 19.399 1957 14.660 15.010 20 .352 1 958 -----“ 2 0 . 7 5 2 “ " “ 15.94 7 19-.4T4 1950 ?4. 4 4? 17 . 2 0 4 19,595 1 9 6 C 24 .927 IP.623 16 .614 1961 ? 5 .9 68 14.17P 17.*80 196? ? 6 .675 14.256 16.715 1 065 26.713 16.96 3 17.314 ] Of i* 22.22 0 21.267 17 .6 9 4 1965 ?4 .430 2 2,24? 16.195 " 1 966 " 22 .9 10 '■ “ 2 2.394 36.9 70 ‘ 1067 19.416 2C.568 17 ,7°6 1968 19.7 07 21.^05 19.4 72 1969 19.5 66 2 1.774 20, 1 97C “ 21.233 21.739" 19.787 1971 22,524 22.547 19,707 1 97? 23 .3?4 23.519 2 0,790

^SRCF:'■ CAucucATnr------■■"CAtcuimr------"“CACCJrATFP

— ro - V3 WAGE. DIF F £ K £ NT I A L S ,RF T WF F N_M AN UF A CUtR I NG _AN D_ AG R I C.U.L1.U RJLJ AV I S A G r- ANNUAL)

YFAR MFG VS AGR1C KFO VS AGRIC MFJ VS AGRIC

______( p.EFL : GNY . THT) {OFF L : Cp 1 .nV R AL ) THOUSNC. CURS KCS TH0U$p*0 1«67 KCS THDUSNn 1967 KCr

T«>53 ■~5TT^ - —477??“ 1964 5 .972 "'■.306 4. 7 54 1955 4.F24 4.747 4*721 1956 4.06F 4.231 3.742 1957 3,55? 3.745 3. V n 1958 4 . G 20 .. "4.3}?— ” - “ ? . 7’67 ' 1959 3 .7«2 4. 264 7.6 50 I960 4.1 16 4.667 4.33? 1961 5*212 4*631 4* 434 1962 3.P76 4.421 " 4.11^4 1963 3 .756 4.25? 3. RP* 1964 3.672 4*265 3.7PO 1965 3 ,t44 **.042 3.511 1966 ..... P.fHC 3.27? 1 °67 2 .772 2.772 2.77? 196 P 2.124 2.066 ?. 1 '■? 1969 1 .7 PP 1.6? P 1 .706 1970 2.4 36 2.215 2.256 1971 2 .5P0 2.346 2.431 1°72 2 .544 2. ??4 *>,409

~ S RC E : '"C A LC U L’AT F P C A LCUU AT EP‘ ------C /SUC tO T FT JPErt.SONAL INCOME ..COMPCN.ENTS.TRANSF£R.paymentI. = h e a lt h + TMCipar»rr

YEAR HEALTH-SOCIAL PAYMENTS PY TOTAL TRANSFER TOTAL TRAM'KkS

______IN 5 U RA N C H _____ -STATL INSURANCE PAYMENTS -D E F L ; G JLY-f— 3T H

BIlLION CURR KLS BILlION CURR KCS RILLTON CURR KCS BILLION 1^67 t\C s

i t TT K F T “ T ^ ____ R “ 7 7 T E T 195A R 10 -720 R 0 . C 10 K 1 0,730 r< 11 .938 19 5 5 R 11.788 R 0 .069 R 11 ,452 R 17.220 1956 R 1 2.963 R 0 . 3 4 7 R 13.111 K 17.372 1957_K __ _15L.9J.8_ JL _0_,.23o_ 4 .16.157. 8 14.347 195 0 R 16 .005 R 0.23F R 16.243 R 21 .636 1 9 5 9 R 17.613 R 0.2R2 R 17.894 7 7 7 , f, P f. 1960 IB-077 0.366 19.73? 2 ° . 2 6 7 .1961 20,056 O ,40 A ... 20.4 5° ____ 31 .695 1962 21,482 0. 4 6 6 21.950 34.676 1963 22 .347 0 . 64v 7 2.896 36.173 1969 2 3 . 2 0 7 0.64 2 23-864 7 6 . 3 5 9 _?4,26L__ _CL.S2.e_ __ 25.139 34.3 47 1966 25 ,366 0. 62P 2 4 . 1 9 3 3 2.5 *>8 1967 26,5 99 1 .024 27.623 2 7.62? 1969 30.725 1.140 31.8 64 29, co3 1969 3 7 . 6 3 4 .1 .375 3 9 , 0 6 9 .._. 3 ? . F ? 5 1970 40 .29*, 1.656 41-950 3P.3?r- 1971 41 .791 1.752 43.543 4if.6f 7 1972 44 .7 54 1 .906 66.667

SRCE: #2 168, 70, 7 ?1 #2 (68, 70, 731 CALCULATE!" CA LCULATED K = THIS FIGURE ESTIMATED WITH A REGRESSION EOUATN DR BASED ON FIGURES E5TIMATFP WITH RE GRtlS S10;i_E.0.IJATNS.*. EAGO r<

PE KSDN'AL INC OM E___ C U M PON! E_N T S_:_ HT E E P. IN COME = A_G SALE S+lHANS »INT E_P EST ON ^AV t-MSC

YE AR UTHER INCOME HTHCR INCOME

______PF F L: GUV, TOT__

MILLION CURR KCS P ILL! PN 14*,7 KCS

k — o T c v r ft " “ " * 7 7 0 9 ------1954, Q 6,951 0 6 . 7 4 0 ” 1955 R 6*210 R 6. 1 14 195*> R 5.844 P 0* 082 19 57 k 7 • t'? 1 R 8 . 0?6 1 9 5 F ■R' ” 5 ,3T6~ "R’---- " 5VT93' " ' ' 19 59 R 5.4?f? R 0. 114 19*0 10.4 56 11 .*50 19*1 « .30 7 lo.?o,6 19 02 8.809 10.048 19o3 i o .r -m : 12.38? 19 04 11.707 13.oop 1905 1 4 • ?4° 10.840 ”19 06 1 6.C7F T F T 273------190 7 17.800 17.P90 19 00 19.059 19.J26 19f.9 20*157 18.471 1970 2 1.44? 14. 5 00 '.. . 1971 25. 2 0 ? 22.985 1972 27.382 21.028

SRCF ::"'*/2 T 6 F ‘,“'70, ”7 3 r * “¥ 2 ~ r 6 P ~ T 0 T T I 1 ' R = THIS FIGURE ESTIMATED WITH A REGRESSION O U A T N HR hASED ON FIGURES ESTIMATED WITH REGRFSSIDN FQUATNS.

ro \j3 V-m _) L-, v . V. h—i u.' t r 1 ■a a |H I Cl L— r I* o .c.t\. w l a. 4 u % '■<■* II f-(U l j 1--' Q Li i_ ir» a. r- oi c l -. j .tiu_ i'- c. j'. i\.if ^c. til _J a ' »-H I • • • * Cl C j L .< J4 vV -C a I-4 O' l~~ l\ f~ PH -c -L '-"v «r *• cr‘r‘vt' r- a a ^ i / i c fH{\, tr. *.. f— I LJ a . c~ _ i J 17, o K' 7T 1 r-' c M l n: rtr ^ cr y r*; c i 1 O >r. I' LL ••i Y ! : ; r ^■'t _( 3 , rvic ,c -c r^o r^o ^co cx'/i 4-di *->./: a -tcviy -J ^,~ P •L ^cr v-c o ir ■” r\jr-ex cv-n^oc r p. ►—1 •i O a- ncvrvij-'o r-r-f—p-«t p -o r ^ c ^ rvu u_ a »7-l 17) r 1 • ••••'••• J »*•••*• u : a i *— a c z II ir.ifi'j "4 (E.'sCO' *“'0-:'J'6f^C i> - i c t — L j , • - c:! r-o <7 i-'"^■4.-^r,“tojc t'-coo o<\.i'i LT: Q. l )| c M l r~* r—■ *—I *-J f—I r—I pHm i mHpHpH f x C\j 77 2 3 ! < ■ k— .LJ f - C d T J _1 h J ■*TUJ: » LLj __1 { <[ 3 J > ll1! »“ i ■O c j z ! < ♦— C j \ c bd adneodnd y y LC 1 1 t_ _J 1 o *— U. _ l LJ c r v i ■-J Li-i v : >—tj.j: + : c : — ’I t r ^ i ■ T' |4 O' O Cj < r-t" - h CO •-• C M " aj r\j »-i i—i fx f"- C i tM J ) •— 1 o )T-vC4 ir-cr*-* r<"!.-H 4 cr riAjr^c-44 ix r~ p*‘ IX LU, t ~ t - l J- a -a I n f' (\iirn f'0 4 ifi c H 'icTO' i : • • C- pH **•**•*••• • • - 4 O ; u . L ■ — »r-O, - 1— C m-i r—4 •—■r— * PH •—11— r l IV I ‘ J f \j (J M l < *—• r L j < 2 a . • _J ! i

PH -J PH •— * u . t—1 a i ; a : trcdacacodcdod tL I ! V. I O) t ! x j o ( < LL ** v : CL O a : I I ■»; 1 - r - a- — 4>tnO' i—i'J pHOtcum E ST I M A U D

■ h : fSjo<\i4cc<'-r\j4‘r,“i4*>Ci'r C a- <*■ 4 (ii 4 aj cj c . M ATFT W I T H + 3 M 17 41 -c p - n j lA J j n ■£■ -O pH (\!-O^PffioO l/VA UJ y-Vl V i *—i QI 1°. * » fc *. • + »«»** • tin* »•* i - M- —' U: II SI; i ►— o r - Vi Ul ' ‘ od PHOCOC'-'i-Hi-H'T 4 A I"- iTi H- CJ H i Ld ad • H s f o c c r a . c p ' m -c>e r\ i 4 r- c P “ r- 1> M a . m 3 .ol'-rflfLO'aiXrvjMiiJ O' 00"J ■J,P 4 0 ^ h C' o li S. a O I # • f - o ■44c-tGcnc^P'f'-rxtra' ■C'Cir, 'C^nsCl'~«-H4• c- Od u _ f ! 2 ccl <7 <7 O •—<»-*f M r O f rci4 ’ir.'£r“ 0 -i-ir\,4 'iA mH z r 4 LU; Q iH iH iH iHM iH iH iH iH i^ iH i-iihINCIiCIJN i—i f— Jl : M i c a 1 _J —i H- o _ l CNi * 2 MH 2 LH t-H C. Yota: adadoeoc ; C,: J ' it ) ad r04-vAvO(^eoO'0>-HfS;r04‘ LLI UJ• C7(7(70l7

v-1 < disposable pfpsl ni5P9SA8Lr PFPSL TOTAL WAGE AND TOTAL W3RKFRS*

19CCVC IN AG«TC INCOME IN NONAGP INCOKE TAXFS SOCIAL BENEFITS

BILLION CURB KCS PILLION CURR KOS nil LION CURR Kts BILLION CURR KC T J . - ^ 3 ------^ T7?T5^---- TTSV ------7 7 ^ 7 ------_------5V031- - - .. - 2T.01 0 ----- 60.800 8.012 1955 2 1.550 63. 15? 8.379 5.223 1756 27.55? 6 7.737, 9.025 5.497 1 ) j 7 ? 3 . 1 6 3 72.976 9.296 7.127 ■...... rnsT" 7C.J7U 75.4C4 "" ■ 9 . 5 7 ' 4 " 6.57? 1957 1^.426 7o.052 9.899 7. 175 195 j ?C.830 34.66 8 10.518 7.519 195 1 ?C.579 89.671 11.239 7.820 .... 1957 18.‘32 I 93.147 11.693 8.269 19 5 7 15.179 94. 163 11.815 6.207 19 5 5 77.116 98.649 12.508 3 .363 19 6 3 7 7.303 107.396 13.301 8.530 T 9 T 9 1

...... 5 ? C p :■ n'5 ■'" ” #14 " #14 ..... " # L4

■ + s N P T AVAILABLE. KETAll T h A D E _,__S A L L! S: CURRENT CRD UN S

YEAR I. INDUST GOODS II. FOODSTUFFf III. TOTAL PFRCFNT FOOt Or

______t PROCESSED C UN) - I + 11______TOTAL tCURR KCS )

BILLION CURK KLS BILLION CURR KCS BILLION ]C67 KCS 'TRCFNI ito T57tV>r------rrrrr>T------tttttt------1°54 28.3GC 41 • 91f- ’ ?O.?X0— " " "S4.6F7 1°55 30.300 45.000 75.ICC 19 56 33.400 47•100 BO.500 *£.*'9 1957 37 ,BOO 47. PCX' P5.600 ie,P4] 19 5P 3T.5TO 4 F . 5 0 T -- P 6 V D F P ------■'TTT.^OX----- 1959 38,900 49,700 FF.600 *-6,094 1960 42.400 52.100 94. t '0 45.13? 1^61 43 ,300 54,4, ,0 «r,?0C 4-.OC6 196? 43.600" 58. (CO 101.600 " 57.6P7 1963 4 4 . 5 0 0 59.10c 103.600 r-7.046 1964 45.700 60.7(;0 106.400 67 .04 <- 1965 4 8 . 4 0 0 6 3 . 4 0 C 111.800 4 6 . 7 Of 1964 5r . 5 0 C 64V6CC 11773X0------B5. ?C~ 1967 66.700 68.100 174.3C0 tA,c67 I960 69.000 73.2C0 142.2C0 r1.4?7 1969 80.100 79.?00 159.*00 4o.7]7 1970 81.100 P2.100 ” 163.200' 50,306 1971 86.100 65.600 171.700 4Q.P44 1972 Q0.200 89.9C1 18 0.100 49.917

SRC *^: ~i? r U96iPT~T*rm — *2“ n9FFT T9771— ^2“n^-£TV "19 7^ )— CATTUOTFP ----

T O ■ VQ o\ TALE 6'

RETAIL . TRAOF SALTSIDEFLATED OV APPROPRIATE Cn.VJ^EK PRICF TNnTCES

YEAk IV. INDUST GOOfi^ v. FnOPSTUFFS V I. TOTAL PERCENT Apnr OF

PF FJ.._C PI IGOpDS_.p EF L £ PI.,. FD 00,.., =_. LV. _ + . V______IQI-AL._ . KC S) BILLION 196? KLS BILLION l r-£7 6.455 ^ , 2 * ^ 1960 43.fcI0 53.736 Q?.?44 ^,1^’ 1 °61 45.318 57.016 Il?.3?6 _ tr'.7]6 1962 45.R1? 59.264 166. (

SRCF: CALCULATED C'ALCDL A TFT T 7 U X U L " A T F p 'FA LOT)L"A T f- P

ro -4 J A Ge 6 4

RETAIL TRAC'F .. SAIFSSALTERN ATf MEASURES OF TOT A l .SALES IN C GN _c T ANT f.rtPHMS

YEAR VII. TOT : 111 OFF PFRCF NT FOOD pp VIII.TOTsIII OFF PFR CrNT FOOr PF

eyl t£U&QQHE_niE_ i .d i a l _ l v i l j ______b y m p r o cone off thtal tvttt > ______

DlLLlON 1967 KCS PERCENT 3ILLI0N 1967 KCS PERCFNT

T 5 T 5 ’ ~ Z 1 7TB " ieTFT^ F?7?45 . “TT^St 1956 61.359 59.525 6ft.023 43,6«6 1955 68.066 59.066 73.107 5*.°75 1956 74.991 57.799 77.7C3 4s,7fi? 1957______.8 L. _ 3 0 , 9 . ______55...5A?.__ P 4 . 4 1 P ______E Z . A E t . ______1958 81.634 55.877 P4.4P0 53.676 1959 86.563 55.433 90.316 53.1?« 1960 97.347 5 5 . 1 9 1., 97.624 54.033 ___1961 ____ H*2 *3.6.2 55.702 _ 1 C Z « , 6 1 2 ______55.566 1962 1C5.047 56.416 105.285 56.2P9 1963 105.865 56.72? 106.584 56.34^ 1964 108.411 56.535 1^7.366 57.0R6 1965 __ _ _113__i336 ______56. 1 ? ? ______115. 975 ______' 1966 1 18.998 55.L61 '121.933 5 -.7V'“ 1967 124.800 54.66 7 124.800 54.6 67 1968 140.645 51.462 141.633 51.120 1969 152 ,137 ______. 50,5?9_ 1 4 3 . 5 1 4 . „ _ __ 57.666 1970 154.079 51.679 154.986 51.177 1971 162.541 50.997 163.213 5C.737 1972 171.ie7 50.872 171.687 50.7??

SRCE V'C'ACCU'LATE D Ca CCULA T F. V C A T CUC a T ? P I AUUpT'f- n

a) iagt f.

KETA1 L T KADE , f A LF S : PE_Fl AT FD_ft, Y APPRCPR 1 AT F _ rRDSS NATIONA 4 INCOME PE^L >T°\f

YEAR INDUSTRIAL GOODS F n P D S T L'rrS TOTAL = INn+EOOO PERCENT PPHp OF ALU P NATE TnT ^

DEF: GNY, K£G DFFL: GNY, AGR ...______TOTALtl Q47 KCS ) IT I DFF l :... r, MY TOT

HIlLION 196? KCS BILLION 196? KCS BILLION 1967 KCS PERCENT ‘MLLUVJ 1 967 KCS

r ? 5 3 ------l ^ T Z T l ------7 7 7 S 7 T ------5 F T T F 7 ------F 7 7 ^ ------F ? T 77? ------1954 22.711 81.125 103.847" 7 0*1 66.066 1955 29.414 76.966 K ’l.otn 75,->7« 7 4 , 0 3 6 1966 30.214 75.900 106.204 71 .931 93.714 1967 36.101 77.133 112.234 63.729 96.247 195F - 36V008 75.0*9 11 1 .078 “ 67.583 92.671 ' 19 'j° 34,636 7C.334 10°. 870 64.016 9°.624 I9 60 44, 9 M 64 .420 109.37] 68 .coo 107.16? 1961 46.196 70.164 1 1 6 . 7 4 4 6 0.296 112.624 1962 46.611 68.409 114.927 " '"59.523' H5.P9‘j 1963 46.601 71.837 U P . 717 60 .5 11 117. 2P3 1964 52.186 71.019 123.204 57.643 12^.601 1965 56.246 66.417 121.663 53.769 131.207 ‘1966------5 0 . P T 7 ------65“,644' 12T.53T 5272°3 13 3.3VC 1967 56.700 68.100 124.pun 94.567 12*.POO 19t>8 67.163 73 .971 141.134 52.41? 138.347 1969 73.328 77.492 150,3?0 61.381 146.973 1970 ' 73. 132 ' 74,960 ” 148,091 50.617 l*f .41* 1971 77.798 75.214 153.013 40 , 1 6 6 ]C 6 , 2 P 4 1072 P1.6' >7 70,4X3 161,721 40.414 164.610

"SR'Cr:* CALCULATED * ---- 'CAfCUL'ATEC CAL'C'JL'^TFP...... CTLCTi'LATTP C />L’CUL’a T f D

ro \D VU FAGF 6f

CONSUMP TI ON (NO'IPROruCTI VE_,.. _N A TJJIN AL^„I NC OMT BY F NO USr )

YEAR TOTAL NOrJPRCP TOTAL NO ('.'PROD IMPLICIT PRICE PERSONAL ( PV ^ ) S ncIA L C.n< T UOPT = CONSUMPTION .CON s u MVJJ 0 N D.EF.L T N PRO CONS) CONSUMPTION iOJ\LPRC_ -.J>tRS.NL.. PILLION CURR KCS LI LL ION 1967 KCS 1967 = 100 BILLION 1967 KCS ^ 7 L LT ON 1 967 KCS

F T 5 F — T s r r ^ r r ? T 7 i n ----- 19 54 101.270 9 7 . 7 9 7 10 3.700 71.957 7 5 . P40 1955 105.576 1^2 *079 1C3 *000 77.701 24.378 1«56 112.625 108 .SCI 103.600 P ? .927 74.*74 19 57 118.237 116 *188 I n 1 .400 40*758 ..75f*M ____ 1956 "119.634 " 117.767 10] . 2 00" 9 T .3 5 7 T 7 6.4 1 7 1959 171.385 123.292 4p.100 95.328 7 7, 9 6 4 lOfcC 13C.399 134.497 96.8 00 1 0 4 . 367 30.137 1961 134.878 1*0.396 45.701 It 7.700 3 5.696 1962 1 4 0 . 04P " 1 4 4 . 5 4 7 9 6 . 5 0 0 110,163 1 4, 1963 1 4 3 . 4 5 4 146.956 9 7.700 111.361 ■^5.59 5 1964 147.643 14G.459 9 4 . 1 ^ 0 114.713 37.746 19 65 154.169 159.3 33 4 6 . 4 0 0 120.514 3 8,814 19 66" 1614536 "1 67.204" '97,T?0‘r I 77 T " 4 C ."1 8^ 1967 175.576 174.932 100.00C 131.380 y*4 ~3. r'5 -r->4 3 1966 194.196 142.344 1C0.40C 145.614 46 .886 1 9 6 9 714.346 204.011 111.000 _1 56.135 47.876 19 70 220* OIL 2 08.129 105.300 156.750' 6161.374 .31 1971 733.487 271.056 105.700 164.51 9 66.5 3 / 1972 246 . 8 3 5 2 3 4 . 4 4 0 1C4.°CC 172.350 6 ? * G 9 f

S R C t : ‘#2 y 2 V~ C A C C t T C A T E r ----C A L C U CAT FTT' A L T U D f T £ 0 O ICOLAT^r" pash h i

COMPONENT ? OF ___P.FR 5 n N A L__£.Q .N ?. Urt p 11 ON.

Y8AK t o t a l r e t a i l CO = OTHFK AGRICULTURAL CONSUMPTION

___ TK_APJF„Py R.C.HA 5F_?_. CHNSUMPUQii f/'A^K£T_.23JJKiL.4A9£5. USLAINO . -----

PILLION 1967 KCS BILLION 1967 KC 5 PTLLTOh 1967 KCS 7ILLIGN 196 7 KCS

50 *6 63 7 ~ Z T ' l 1 7 7 6 1 ______T . ^ f " 1954 59.346 ? .506 1.338 P. 7 67 1955 64.172 ?.62 3 1 . 549 “ .3 57 1956 69.651 2.827 1.563 u * P 76 1957 76.593 ______3.07 7______... 1-.-565 ______q.._5??„ 1956 77.56? 3.109 1.60? ci * 0 p 7 1°59 P 3 .0 02 3. lb? 1.15* 1 . “06 1060 90 7 3.46] 1 .4^1 P . 46 ] 1961 06.456 3.7C C C . 944 1962 98 .6u3 4. 137 <>. 7 7F 6. 6^ ‘ 1963 99.701 4.361 tj • 5 66 6. 71 ? 1964 10?.56? 4.66 L’ 6 , P 4 6 1965 107.PP5 4 , t P 2 ______0,9 62______1966 “ 1 l?.o°7 “ " " 5 . ? o ( ■ 0.704 °.f-?7 1967 117 .537 5.37 6 0. r 3 1 7 .63? 196P 130.567 5.6' J- o,'-26 ? .61 3 1069 139.OOP 5 . 99 f 2.036 P. 19- 14 70 141.346 6.18? l.*»37 r .17*- 1971 149.221 6*613 1. 177 7.60* 197? 1 ‘>6 .644 6.937 l.?l° 7. 646

SRC f ; *Z» CALCULATED' ' 02, CALCULATED c a l 'COla't f T“ " v 2" T6f=," 70'," 7?)

■--- Vn O £?.H^NENTS .OF _PtKS CONSi RETAIL FOPD^PE RCETiT FOOP*TflTAL RETAIL TRAPF PUKCHAcrr

YEAR RETAIL FOOD (PCT RETAIL FOOD (PCT RETAIl 8000 {PCT RETAIL FOfin ( PC T

______F00P,P.63tC0L A) FOOP,P.64,COL ?) FOOP ,P.64tCOL A) PQOn,p .65.CPL St BILLION 1967 KCS PILLION 1967 KCS BILLION 1*67 KC^ MILLION 1967 KCc r o : r - ~ 29.7 F7 ^766 6"’ 777TI77 % i i. C 6 ^ 1959 35 .295 " 35.326 ? 1.8 65 ' 9 6 . 367 1955 37.77C 3 7 * R 9 1 35,? 79 9», ] Pf; 1956 90.131 40.258 3 5.65? 4 *,836 195 7 92.979 9?.691 90.^79 "1758 "’ ....93 .277 “"93.33*"" "" " 91.6?? “b t .- a i < r 1959 95.6 55 96.010 99.098 53.135 196C 50.162 5U.161 50*8-18. 5*.5 3? 1961 53.169 53*171 53.091 57. 55* 1961' 55.61? 55.628 ... 5 5.503 ^r.69] 1963 56.559 56.5 6 3 56,171 6 :.??n 1969 57.993 57.98? 5P.59P 5*.128 1965 60.5 00 60.559 5*.181 5 8 .oo* 1966 62 .1 56 62.217' 60-.719 ‘ "^o.Ttrc 1967 69.136 69,136 69.136 69. ] 3t, 196F 67 . 2 22 67.192 66.796 6 P.43? 1969 71.037 70.6*9 74,993 7] . F 8 6 1970 " 73.267 " 7 2 . 7 6 9 ' " ' "72 7? ?7" 71 .59 9“ 1971 76.391 , 76,0?9 75.710 7?.?51 197? PO .071 79,693 70.967 7 7. A (.6

'SRCr: C T L C U L A T F -- CAtCUCATFD".. X AlXULATED "CArrrrcATErr Cp HP ON ENT 5 0 F__PTK r C H_r J 5: _ C A = CO NS_ AG_ G 00 09= l>.F _\L_ F HOD ±AG I_ ?UR+C HNS ,XN_j< Lr IT.

COL,. A )____ C.OL.^J.______CP L_ 4J______PILLION 1967 KC5 PILLION 1967 KC? MILLION 1^67 KC-? RILLTPN 1^67 TTF1!— "“ ~ r r ^ 7 ------ZT>-TTT— ---— — -T7777-— — 1959 95*909 45.4,31 41.'? fO 66.97? 1955 4 8 . 6 7 6 98.797 96.189 59.686 1«56 51 .670 51 ,6°7 50.292 6.1 .275 1957 63.566 53.624 ______52.96?______A3.7 2.7_. 1958 5 3 7 9 5 6 54.U P ~ F O / m 6 ‘. 098 1069 66.019 65.179 63.26? 62.298 1960 60.179 60.17? 60.0 30 63.699 1Q61 tl .723 61 .71 5 61 .585 .. _ .....66,100 1962 63.025 “ 63.991 62.9 16 66.104 1963 6? .833 63.03? 63.451 67.604 1° 6 9 65.929 65.469 66.0?? 66.606 1965 66 .2 5?______68.311______6 6 t9 ? 3 J ^ 76J 1960 ~ ' 7(i.PP7 - 70.94)' ' fV.4'50 0 7.f-?f- 1°67 72.610 72. (-1 0 72.610 72.610 106p 7r* .661 76.631 76,1 88 77.87? 1969 01 . 2 6 6 £«>.9?3 _ _ 8 6,17? ______82.11^ 1970 82.983 81.679 81.55? 80.761 1971 35.176 84.809 84.496 P?,l?6 1972 BR.P35 C& . 4 6 4 80.221 86.17]

" SRCE : C ALCULATFDC A 1 ‘C il LTTE IT C'AXCULATEf" OTIC U l ATT P~' COHPHNfNTS OF r:FRy_C.ON.S.;...C.’-L-CQJil_MfG. -GOOPS.-.T-CT-AL-JMlL.PilRCHASEi -CA______

______X0L._4l______COL-ZJ- ______C O L 4)______C Q L Z 1

PILLION 1«67 KCS PILLION 1°67 KCS BILLION 1967 KCS 3ILLTON 1^67 KC T^5i“ ^ — 1954 24.047 24.020 27.461 12.97<-' 1955 26 *4C2 2 6 • 2B 1 2P.B93 15.992 1956 2Q • 520 29.39? 30.79° IP.PI". 19 5 7 ______3 4t 115______3*1, C 51______3 5 .4 14______23 j £ i 4 _ 195F 34.2G5 34.223 35.9?o 25. U3 1959 37.147 36.09? 39.904 2rj.F67 1960 40.725 40.727 40.P69 37.355 1 9 6 1 ______42 .272______42 .2 6 5______4 2 . 4 1 5 ______2 7 .Z O O _ 1962 42.991 42.975 43.100 35.911 1963 43.147 43.146 43.529 3 4 . 3 7 ! 19 6 4 44 . 6 1 9 44.*57 9 44 . 0 1 4 4 3 . 44 2 196.5______4?_.3Z5______4_7.?2t______4Z..7Q4______4 Z . P Z 6 ___ 1966 50.1! 41 5C.76 0 52.27P 5 3.90J? 1967 53.401 53.MM 53.401 63.401 1966 63.345 63.375 63.621 62.134 . ..1964 ______6 6 . P 7 1 ______6 9 . 2 1 4 ____ 6 4 . 9 6 5 ______6P.022_._ 1Q 70 6fi.079 6P.563 69.009 64.Pnl 1971 72.P30 73.197 73.511 75. °7r, 1972 76.576 76.956 77.192 7 ° . 2 4 ?

'* S R C E: "CAl COLA'TEO CALCULATED' ' CALCULATED CALCULATED APEENDIX B

DATA SOURCES

305 DAPA SOURCES

1. Statnf statisticky urad, Cisla pro kazdeho 1968/9 (Prague: SNVL, I960),

2. a. Statnf statisticky urad, Statisticka rocenka: CSSR 1962-1965, 1967, I960 (Prague: SNTL, 1962-1965, 1967, 1968),

b. State Statistical Office, Czechoslovakia: Statistical Abstract 1958, 1968 (Prague: Orbis, 1959, 1968),

c. Federal Statistical Office, Czechoslovakia: Statistical Abstract 1969 (Prague: Orbis, 1 9 6 9 ),

d. Federalni stati3ticky urad, Statisticka rocenka: CSSR 1970f 1973, 1974 (Prague: SNTL, 1970, 1973, 1974^

Note: b, and b, are English summaries of the corresponding volumes of Statisticka rocenka: C5SR.

. ^ ^ v 5* Kolektiv autoru, Strucny hosuodarsky vyyo.i Ceskoslovenska do roku 1955 (Prague: Nakladatelstvi Svoboda, 1969)*

4. "Selected Basic Statistical Data on the Economy of the Czechoslovak Socialist Republic", Czechoslovak Economic Papers 2 (1962 ): 187—237,

5. J. Ypsilantis, The Labor Force of Czechoslovakia, U.S. Bureau pf the Census International Population Statistics Reports, Series P-90, No. 13 (Washington; USGPO, i96 0 ).

6. A. Elias, Manpower Trends in Czechoslovakia: 1950 to 1990. U.S. Bureau of Economic Analysis International Population Statistics Reports, Series P-90, No. 24 (Washington: USGPO, 1972).

7. V. Nachtigal, "The National Income of Czechoslovakia from 1948-63," Czechoslovak Economic Papers. 5 (1965 ): 167—173.

8. United Nations Statistical Office, Demographic Yearbook 1970 (New York: United Nations 1971),

9. Statni Banka fieskoslovenka Bulletin Information and Research Department, Report on Economic. Credit and Monetary Development in the CSSR. vol. 1970. 1971 (Prague: 1971. 1972).

306 307 10. Slatisticheskiy ezhe^odnik stran-chlenov soveta ekonomicheskoy vzaimooomschi. 1971 [Statistical Yearbook of the Member Countries of the CKEA. 197U , (Soviet Ekonomocheskoy Bzaimopomschi: Moscow, isii).

11. Statni statisticky urad, Pohvh Obwatelstva v Ceskoslovenske Socialisticke Republics. 1950r 1955, I960, 1965 , 1970 (Prague: n.d.).

12* J. H, Michal, Central Planning in Czechoslovakia (Stanford, California: Stanford University Press, I960).

13. P, Pryor, Public Expenditures in Communist and Capitalist Nations (Homewood, Illinois: R. D. Irwin, T 968 )"," pp. ^^-340■

14* 0. Lazarcik, Comparison of Czechoslovak Agricultural and Nonagrl- cultural Incomes in Current and' l^Xl 'Terms. 1937 and 1948—1)5« Occasional Papers of the Research Project on National Income in East Central Europe, Ho. OP-20 (New York: Columbia University, 1968).

15* J. Pelikan, "Development and Structure of Savings: Deposits of the Population," Czechoslovak Econonic Digest 4 (June 1972): 1J-34*

16. Not used.

17. United Nations Statistical Office, Yearbook of National Account Statistics vols. I and II 1968, 1972, 1973 (New York: United Nations, 1969, 1974, 1975).

18. United Nations Statistical Office, Statistical Yearbook 1966 , 1967, 1969, 1973 (New York: United Nations I9 6 7 , 1968, 1970, 1974).

19* U.S. Arms Control and Disarmament Agency, World Military Expendi­ tures and Anns Trade 1965-75. U.S. Bureau of Economic Analysis (Washington: USGPO, 1974)» PP. 22-66.

20. P. P. Hyers, "Population and Labor Force in Eastern Europe: 1950 to 1996" in Reorientation and Commercial Relations of the Economies of Eastern Europe, U.s'. Congress, Joint Economic Committee (Washington: USGPO, 1974), P. 456. A F E W ID IX C

RELATED SERIES AND REGRESSION EOLATIONS USED TO ESTIMATE MISSING DATA

308 Serie* '5? delated Series (R) Regression Equation 'IF

I. Ir.veatcent* (1967 KHsJ Investtent (1/64, 4/64, 1/67 K&.)

A. Total Total2 S - .9671 + 1.3C9 R + 5.622 DUM64 - 22. 75 DUK67 ,2562 .9997 (.3461) (.0097) (.1900) (.4350) ) a. Industry Industry S * *. 11B6 + 1.295 R + 2.944 DUX64 - 8.241 DUX67 .2vlt .5553 (.2299) (.0152) (.1503) (.IvsC) 2 C. Construction Conscruction S - -.0268 + 1.280 R .2203 DUX64 - .6337 DUX67 .Oil 3 .5757 (.0384) (.0366) (.0296) (.06 7J) 2 P. Agriculture Agrlcultur* S - .2015 + 1.309 R T ,6755 D',1'64 - 2.591 DUX67 .0121 .94 JS (.0905) (.0160) (.0558) (.0942)

E. Plant Plant2 S - -.0369 + 1.470 R + 1. 759 DUX64 - 20.8b DUlt7 .3513 1.013 5 (.0808) (.003/) (.0369) (.1006)

F. Equipment Equips*nt2 S - -.1586 + 1.138 S + 4,056 DUJS4 - 3,416 R7I67 .2196 .9591 (.2367) (.0170) (.1665) (.3154)

II. Cost of living (price) indices (IS37 - ICO)

A. War! era' households

1. All goods Worker*1 overall coat of living index6 S - 21.00 + 1.05J R ,8989 .5325 (4.013) (.0342)

2. Foodstuffs Workers’ overall cost of living Index6 s - 42.72 + .9330 R - ,2011 T6 1.210 ,9ct.’: (5.760) (.Ov','5) (.0525)

3. Industrial goods Workers' overall cost of living lnd*x6 s - -3.929 + 1.133 a .4748 T6 2.033 .924u (5.919) (.0817) (.0901)

A. Services Workers' overall cose of living index6 s - -5.633 + .4050 R + .3742 Id .7941 .9775 (3.732) (.0312) (.0343)

S. Cooperative faraerd' households

1, All goods Farrars’ overall coat of living Index6 S - 8.310 + 1.093 R - .2797 16 .5671 .4554 (2.620) (.020 3) (.0261)

2. Foodstuffs Fanners’ overall cost of living Index6 S - 14.25 + 1.130 a - .6124 TO 1.703 ,7 719 (7.690) (.0612) (.0785)

V*l O VO S s T le s ( 3 ) Related Series (R) Recresnlor. Eauatlon gl? 7/ t J. Industrial goods fanners' overall cost of living Index S » -10,50 * l,lo4 R + .2751 T6 1.G39 .954 v (4.602) (,0372) (.0478)

4. Services farmers' overall cost of living Index® S *■ 5.103 + .3810 R + .9324 16 1.241 .*530 (5.749) (.0446) (.0372)

III. -it annual savings deposit* First-order autoregressive® S - -.2614 + .1361 S(-l) + .7964 T6 1,297 .330- (current Ktfs.) (.7375) (.0982) (.2164) J 4 IV. Covernccr.i iiKrmo: budgeted * (current i-.ioj

A. Total revenue Flvst-ordar autoregressive®*® S - 50,28 + .2461 SC-l) + 3.578 T6 - 16.25 DKXS + 20.37 C M u 3.976 .5765 (12.13) (.1*88) (1.060) (4.311) (5.504)

5. 1'roa socialist sector Total budgeted revenue6 S - -7.837 + .9877 R - ,6983 To l.C4o .5574 (2.701) (.0103) ' (.2091)

C, Taxes and fees First-order autoregressive S - -2.181 + 1.224 St-1) .3440 .JSll (.6455) (.0512) V. Government expenditure: budgeted*’ (current ROsO

A. Total First-order autoregressive**® S -49.82 + ,2476 St-1) + 3.596 T6 - 16.22 L1365 * 20,45 K11S6 3.6*3 ,>iio (11.95) (.1967) (1.052) (4.329) (S.361) 4 S. National eeonooy Total budgeted expenditure S - -29,75 + 1,000 R - 2,590 T6 3,162 .i-,2? (8.008) (.1162) (.5775)

C. Social service* First-order autoregressive® S - 3.686 + .7972 S(-l> +■ .6883 16 2.155 .5(.4? (6.275) (.3440) (.7697) First-order autoregressive it. Adcir.istrsclcn S - .9119 + .6575 SC-1) -;i;4 (.3951) (.1261) S VI. Cawrr.nrnc i.teccc; actual (current KJs.) 9 budgeted total revenue A, local revenue S - 6.237 + .8931 S 11.76 DGK6Q4 2.819 ,v£54 (6.107) (.0483) (2.334) Actual total revenue 2. from socialist sector 7.074 .7937 R .5)65 (2.369) (.0156)

M O Series (S) Related Series (R) Regression Icucrion sir; C. Taxes and fees Budgeted taxes and fees S - -2.69B + 1.221 R .4136 .i253 (.9719) (.0667) D. Turnover texts Total wage and Intone taxes (source f 14, p. 61) S - 32.04 + 1,462 ft 1,057 .3905 (2.63)) (.2562) t. tfnge taxes Total wage and lneon* taxes S - -.5817 1> 1.U44 R ,33yl .9S05 (source #14, p. 61) (.0848) (.0079) VII. Ccvrrument expenditure: actual^ (:ur:.nt K,.) A. National econony Total actual expenditures S - 16.71 + .3781 R 5.660 .Erii: (6.431) (.0412) B. Social services Total actual expenditures S - -20,73 + .5440 R 4.570 .9i-0 (S.627) (.U36CI) C. Defense Total actual expenditures S - 2.662 + ,0635 ft .6761 .5436 (.7655) (.0045) 9. Vages fund: State budget Total wage bill (current Kcs) S - -4.506 ♦ .1380 R .1053 .Sill (.1940) (.0014) VIII. exports (current Sts)* I1 *

k, Ron-agricultural fuel Total exports* S - .3031 + .3105 R - .1110 T6 .2351 (.1723) (.0414) (.0536) IX. Inport* (current kcs)12

A. Non-agricultural fuel Total Imports S ■ .1312 + .3466 K .2774 .503;. (.1652) (.0090) X. Foreign ecor.ocles

A. Soviet Union: CUP (current Soviet net eat trial product (NKP) S - -101.184 + 2.217 S 13.64 ,9307 t.s. 5) (current R) (16.55) (.0758) 9. Rooanla;

1. XMP (1958 « 10Q) First-order autoregressive S - -5,612 + 1.139 S(-l) 6.731 .5683 (9. OSS) (.0722) 2. N W (1963 - 100) Roaanlan ! W (1956 - 100)26 -1.431 + .6563 R - .1961 126 .3006 .59-.S (.6477) (.0115) (.1141) S e r ie s CS) Related Series (R) Ragressl.T, Ecuatlon 526 3. C37 (current U.S. S) Romanian SIT (19S3 ■ 100) S • -1.262 + .266b X - 1.395 T26 .5357 . 1 ? . i (2.052) (.0562) (.6615)

C. Poland: CS? (current U.S. f) Polish !1HP (current SSL) S • -2,740 + .6039 R .4661 .9377 (.6926) (.0610)

0 , Hungary; GNP (current U.S. ?) Htngsrlan SiKF (current F) S ■ .1397 + ,0595 R .2145 . i 915 (.1421) (.0019)

E, Curcjr. Dcnacratic Republic; COR SKP (current H2 S • -3,370 + ,4076 R .3260 .9 8c a GRP (turrunv U.S. ?) (2.264) (.0272)

F. Bulgaria: QiP (current U.S. 5) Bulgarian KMP (current LV) S • -2.825 + 1.419 R .45SS .‘.'743 (.6703) (.0731) 13 XX. Lapitnl stnck, pew definition Capital stock, old definition (1967 K.!s) vlG67 He*)

A. Total Total6 •** S * 296,1 + .8606 R - 8,152 D O S 6 + 5.124 16 2.982 ■ 9y5i (54.53) (.1219) (3.682) (4.917)

S. Indus tr? Industry 6 ’14 S - 109.9 + .7244 R - 8,023 Dl'KM + 3.245 16 1,386 .99-5 (10.46) (.6515) (1.578) (1.64X) & lg C. Construction Construction ' S - 6.793 + .1546 R - .1349 DUM56 + . 7956 16 .0954 .5537 (.2364) (.1344) (.1647) (.1347)

D. Agriculture Agriculture** *** S • 18.81 + .8035 R + 1,743 DUH66 1.446 • 3vio (2.978) (.0325) (1.440)

XII. Demography *6 A. Urban population tid-year Urban population year-end1^ S - 1650. + ,7151 R + 42.16 T17 61 .33 .59ii (1324.) (.2093) (26.19)

B. Population (nillion persons First-order autoregressive1^ S - 1.581 + .$242 S(-l) + .0235 117 .0230 .9953 age 15 and over) (.7651) (.0870) (.0089)

C. Working population (thousand Population (thousand persons, age 15 and S » 5778. -r .2603 R + 42.05 16 32.73 .s-ds persona, age 7 5-64) over) (1837.) (2050) (23.42) * £ 3. Population year-end*

1. Total (thousand Total population mid-year^ S • 400.7 + 974,5 R 11.51 .9997 persons) (million persons) (75.78) (5.413) aeries (S) Related Series (8) Regression Equation 2. Ur ben (thousand Total population mid-year^7 persons) (million persons) S - -6223. + 1009, S + 33.99 T17 .*944 (2153.) (172.2) (16.55) t. Total roverwrit of people (actual r.uebers) between obeca, kraje, Ottresy1*

1, VIthin CSSR Total movement between CSR and SS.T*’1 *l S - 4103. + 10.97 R - 27183. CUri607 + 5S5S. T21 19CJ9. .9477 (108465.) (2.012) (112&3.) (3132.) 2. Vlthir, CSR Total movement within CSSR71*21 S - 31557. + .6883 R - 3101. DU71&07 - 1176. T21 19C7. .5 )91 (5717.) (.0163) (1250.) (193.4) r. Net urban inalgratloo

1. Arrivals Urban population mid-year27 S - 657.2 - 62.05 R + 6.311 117 .9467 (93.47) (15.04) ' (2.10C) 2, Departures Total movement of people within CSR27 S • 19.51 + .6176 R + .6836 117 1.UO0 (1.999) (.0052) (.0422) C. Net rural inmlgration

1. Arrivals Total movement of people wltliin CSSR17 S • -68.26 + .6203 R - 2,415 T17 .9981 (22.%) (.0442) (.4583) 2. Departures Rural population mid-year27 S • 2180. - .1516 R + 9.100 T17 .5847 (401.5)(.0317) (2.737) K, Employment of voted First-order autoregressive27 S - 540.2 + .7263 S(-l) * 19.25 T17 .5964 (157.9) (.07 74) (4 . 302) X1IX. Personal Income (current K!s)7 ^ 24 A. Total Total personal income S “ -15.96 + 1.233 R 1.122 .9:25 (7.495) (.0592) t. Health-social insurance T o ta l workers' social benefits6 5 - 1.670 + 1.313 8 + .8156 T6 .0765 .9991 (1.605) (.2678) (.0539) C. Payments by state iasur- Total personal income ane* S - -1.117 + .0119 S .0722 .5 £32 (.0360) (.0X5)

'cN H1 314

1. Hissing observations on other investments were estimated as resid­

uals from total, industry, construction and agriculture investment.

2. Also included were dummy variables for price base changes in 1964*

2UK64 (=1 for 1964 -6 6 , zero elsewhere), and in 1967* DUK67, (=1 for

1967-72, zero elsewhere).

3. Budgeted data for 1969-72 were not estimated because they were not

needed to estimate actual revenues or expenditures*

4. Hissing observations on budgeted miscellaneous revenues were esti­

mated as residuals from total budgeted revenues and budgeted reven­

ues from the socialist sector*

5 . Also included were separate dummy variables for 1965 and 1966, DUM65

(»1 for 1 9 6 5 * zero elsewhere) and DTJM66 (=1 for 1966, zero else­

where) respectively.

6. A time trend was included: T6 = 1,..,,21 for 1952,...,1972*

7. Missing observations on budgeted defense expenditures were esti­

mated as residuals from total, national economy, social services

and administration budgeted expenditures.

6. Missing observations on actual miscellaneous revenues were estimated

as residuals from actual revenues: total, socialist sector, and

taxes and fees*

9 . Also included was a dummy variable for 1960-64, DUK604 (»1 for i960 - 315 64, zero elsewhere).

10. Missing observations on actual administration expenses were esti­

mated as residuals from actual revenues: total, national economy,

social services, and defense.

11. Missing observations on agricultural raw material exports were esti­

mated as residuals: agricultural exports *= total - manufacturing;

then agricultural raw materials = agricultural - livestock - food­

stuffs.

12. Missing observations on agricultural raw materials imports were

estimated as residuals with analogous algebra to that in note 11.

13. Missing observations on other capital stock were estimated as re­

siduals from total, industry, construction and agriculture capital

stock.

14. Also dummy variable included for price base change in 1966, BUM66

(=1 for 1966-72).

15. Old definition agriculture capital stock, 1953-54, was estimated by

regression using old definition total capital stock (ft), a dummy

for price base change in 1966 (DUM66, see note 1 4 ) and a time trend

(T6, see note 6) as the related series. The estimation sample was

1955-67. In the notation of Appendix C:

S = 6.533 + *0532 R - 5.931 DUK66 + 5.55B T6 (15 .4 4 ) (.0357) (1.403) (1.472)

SER - 1.268 R2 - .9973.

16. Missing observations on rural population mid-year were estimated as

residuals from total population mid-year and urban population mid­

year. 17. A tine trend was included: T17 = 1,.,., 23 for 1930».••>1972.

18. Kissing observations on rural population year-end were estimated as

residuals from total population year-end and urban population year-

end.

19. Kissing observations on total movements within the SSR were esti­

mated as residuals from total movement within the CsSR, within the

C3R and between the SSR and SSR.

20. Available data for the series with missing observations and the re­

lated series include five-year averages for 1950-54, 1955-59, 1960-

64 and 1965 -6 9 . Also, observations for the individual years 1964 -

72 are available. The simple mean of the data for 1965-69 (e.g.,

for total movement within the fiSSR = 372.604) does not equal the

# V five-year average (e.g., for total movement within the CSSR =

373.123), indicating either that some other averaging technique haa

been used, or that some rounding error is present (in the example,

about .1/&).

In order to include as much of this information as possible, the

following sample was used: five-year averages 1950-54, 1955 -5 9 ,

1960-64, annual observations 1964-72.

21. A time trend was included: T21 = 3 , 6, 13 for five-year averages

1950-54, 1955“59, 1960-64, respectively; T21 ** 1,...,23 for separate

years 1950,...,1972. The value of T21 for each five-year average

was calrelated as the simple average of the annual values of T21 for

that group of five-years. E.g., T21 ** 1,...,5 for 1950,...,1954

and 3 is the mean of T21 for this period. 317 22. Also included waa a dummy variable for 1960 -6 7 , DUK607 (=1 for 1960-

6 7 , aero elsewhere).

23. Missing observations on other income were estimated as residuals

from total income, transfer payments and the total wage bill.

24* From data source 14* total personal income = disposable personal

income in agriculture (p. 16) + disposable personal income in non­

agriculture (p. 16) + total wage and income taxes (p. 16).

2|j. The regression equation for state insurance yielded a negative value

for 1953 and therefore was set equal to zero.

26. A time trend v/as included: T26 =■ 1,...,20 for 1953 *. • - »1972c AF-’UNDIX D

THE STRUCTURAL ESTIMATES, DEFICIT IONS OF VARIABLES CItOSS-REFEREHCED TO APPENDIX A

310 519

The Czechoslovak Econometric Model (1953-1972) (standard errors in parentheses below coefficients)

(1) OLS IT - -15.274 + .374 GNY (1.815) (.009)

R2 - .9897 SER - 2.233 DW - 1.236

2SLS IT - -15.336 + .374 GNY (1.816) (.009)

(2) 10 - IT - IH - IA

(3) OLS MSG - -7.568 + .144 1WB + .047 D + 2.539 DUM (.960) (.009) (.015) (.499)

R2 * .9828 SER - .568 DW - 1.868

2SLS MSG - -7.680 + .1457 TWB + .052 D + 2.427 DUM (.980) (.009) (.016) (.524)

(4) OLS TTX - 49.335 + .258 RETS - .204 CPIAL - 23.165 DUM (8.629) (.022) (.068) (1.494)

R2 - .9690 SER - 1.230 DW - 2.723

2SLS TTX - 48.371 + .261 RETS - .197 CPIAL - 23.347 DUM (8.674) (.023) (.068) (1.503)

(5) OLS TD - -3.376 + .098 TPI + 3.428 DUM (.907) (.006) - (.479)

R2 - .9775 SER - .748 DW - 1,576

2SLS TD - -3.464 + .098 TPI + 3.397 DUM (.912) (.006) (.480)

(6) OLS IP - -29.773 + .479 GNY (6.861) (.033)

R2 - .9166 SER - 8.443 DW - 1.235

2SLS TP - - 29.806 + .480 GNY (b.865) (.033) 3 2 0 (7) OLS 10 - - 2.727 + .047 GNY (1.007) (.003)

R2 - .8295 SER - 1.240 DW - 1.265

2SLS TO - - 2.723 + .047 GNY (1.008) (.005)

(8) R - TTX + TD + TP + TO

(9) OLS GEMA - 8.844 - 2.998 MSG + .667 R (5.370) (.896) (.104)

R2 - .8854 SER « 4.612 DW - 1.466

2SLS GEMA - 8.208 - 3.177 MSG + .687 R (5.484) (.928) (.107)

(10) OLS GEO - -89.269 + 1.476 10 + 1.567 TWB - 6.507 MSG (10.477) (.451) (.147) (1.619)

R2 - .9672 SER - 4.378 DW « 1.680

2SLS GEO - -94.167 + 1.807 10 + 1.645 TWB - 7.770 MSG (11.250) (.500) (.160) (1.820)

(11) GET - GEMA + GEO

(12) D - R - GET

(13) OLS EXPM « 1.912 + .017 CMEA + .459 BP - 4.345 DUM + .764 T (.644) (.005) (.207) (.686) (.147)

R2 - .9922 SER - .602 DW - 1.483

(14) OLS EXPA - - .421 + .394 IMPA + .084 BP (.558) (.091) (.028)

R2 - .4834 SER - .134 DW - 2.473

2SLS LXPA - - .814 + .458 IMPA + .080 BP (.777) (.126) (.034) 521 (15) OLS IMPM - -4.276 + 1.008 EXPM - .859 BP (.242) (.015) (.082)

R2 - .9982 SER - .254 EM - 2.123

2SLS IMTM - -4.392 + 1.016 LXFM - .908 BP (.294) (.019) (.108)

(16) OLS IMPA - 3.473 + 1.337 EXPA - .186 BP (.618) (.307) (.045)

R2 - .6050 SER - .248 DW - 2.137

2SLS IMPA - 3.695 + 1.22 7 EXPA - .173 BP (.751) (.374) (.048)

(17) BP - EXPM + EXPA - IMPM - IMPA

(18) OLS GNYM - -327.000 + .124 EM + .537 KM - 2.146 IMPM - 7.462 T (95.342) (.035) (.117) (1.187) (3.524)

R2 - .9899 SER - 4.723 DW - .834

2SLS GNYM - -336.353 + .127 EM + .546 KM - 2.230 IMPM - 7.744 T (100.718) (.037) (.121) (1.268) (3.686)

(19) OLS GNYA - -23.599 + .020 ALF + .173 KA (12.192) (.005) (.047)

R2 - .4789 SER - 2.071 DW - 1.616

2SLS GNYA - -25.517 + .021 ALP + .180 KA (12.433) (.005) (.048)

(20) OLS GNYO - -13.109 + .431 GNYM - 1.445 T (4.012) (.068) (.537)

R2 - .9742 SER - 1.926 W - 1.331

2SLS GNYO - -13.051 + .430 GNYM - 1.437 T (4.060) (.068) (.543)

(21) GNY - GNYM + GNYA + GNYO 322

(22) OLS EM » 1005.26 + .520 MOLF + 6.348 III - 29.389 PRWOM (88.212)(.034) (1.826) (4.331)

+ .374 NUMIG (.164)

R2 » .9936 SER - 13.648 DW - 1.812

2SLS EM - 1003.07 + ,516 MOLF + 6.271 IM - 29.215 PRWOM (89.387) (.035) (1.875) (4.922)

+ .672 NUMIG (.190)

(23) OLS EA “ -75.660 + .995 ALF - .484 NUMIG (39.610) (.020) (.187)

R2 - .9968 SER - 16.691 DW - 1.649

2SLS LA - -98.927 + 1.006 ALF - .358 HUM1G (43.690) (.021) (.213)

(24) OLS LO - - 1730.34 + .371 MOLF - 1.197 NUMIG + 60.375 PRWOM (103.711)(.024) (.230) (6.440)

R2 - .9970 SER - 19.411 DW - 1.928

2SLS LO - -1735.51 + .384 MOLF - 1.448 NUMIG + 56.768 PRWOM (107.642)(.026) (.271) (6.728)

(25) LTOT - EM + EA + EO

(26) OLS NUMIG - -68.826 + 6.226 WMG (20.387) (1.076)

R2 - .6308 SER - 18.002 DW - 1.344

2SLS KUM1G - -72.091 + 6.402 WMC (20.464) (1.081)

(27) OLS ALF - 7135.03 - .638 RPOPJ + 1.279 NUMIG + 101.363 PRWOM (1855.64) (.233) (.497) (11.870)

- 1.014 MOLF (.103)

R2 - .9845 SER - 35.286 DW - 1.733 m 2SLS ALF - 7919.55 - .736 RPOPJ + 1.728 NUMIG + 102.152 PRWOM (2035.50) (.256) (.616) (12.224)

- 1.069 MOLF (.U6)

(28) OLS MOLF - 2239.57 + .157 UPOPJ + 55.804 PRWOM - .478 ALF (815.679)(.080) (16.068) (.096)

+ 50.755 T (16.823)

R2 - .9989 SER - 22.800 DW » 1.592

2SLS MOLF - 2260.59 + .156 UPOPJ + 54.290 PRWOM - .465 ALF (818.452)(.080) (16.672) (.104)

+ 52.022 T (17.235)

(29) OLS WMG - -17.532 + .013 EM - 2,685 DUM (1.709) (.001) (.483)

R2 - .9705 SER - .659 EW “ 1.191

2SLS WMG - -17.674 + .013 LM - 2.715 DUM (1.711) (.001) (.483)

(30) OLS WOG - 26.737 + .410 GNYO - .026 EO + 1,754 WMG (4.571) (.124) (.005) (.254)

H 2 - .7953 SER - 1,876 DW - 2.271

2SLS WOG - 26.280 + .393 GNYO - .026 EO + 1.814 WMG (4.677) (.128) (.005) (.259)

(31) OLS TPI - -269.409 + .052 ETOX + 2.643 WMG + 2.667 WOG (28.724) (.006) (.833) (.401)

R2 - .9892 SER - 3.991 DW “ .9791

2SLS TPI - -273.598 + .052 ETOl + 2.533 WMG + 2.767 WOG (33.484) (.007) (.999) (.499)

(32) OLS TRANS - -1.857 + .465 GEO - .124 CS (.887) (.022) (.047)

R2 - .9871 SER - 1.144 DW - 1,771 2SLS TRANS * -1.912 + .478 GEO - .148 CS (.399) (.024) (.049)

(33) OLS OLY - -7.163 + .102 GNY (1.671) (.008)

R2 - .8924 SER - 2.057 DW » .944

2SLS OLY - -7.189 + .102 GNY (1.672) (.008)

(34) TWJJ - TPI - TRANS - OLY

(33) DPI - TPI - TD

(36) OLS CM - -2.480 - .0745 DPI + .555 RETS (1.112) (.017) (.017)

R2 - .9973 SEE - .855 DW - 1,408

(37) OLS RETS -11.348 + .677 GNYM + 5.481 DUM (3.650) (.030) (3.028)

R2 « .9887 SER - 3.623 DW - 1.547

2SLS RETS - 11.378 + .677 GNYM + 5.503 DUM (3.652) (.030) (3.029)

(38) OLS CA - -62.445 + .464 DPI + .540 CPIFD (25.232) (.038) (.199)

R2 - .9230 SER - 3.819 DW - 1.182

(39) OLS CO - -4.406 + .029 DPI + .043 CPISV + .552 DUM (1.636) (.002) (.018) (.311)

R2 - .9653 SER - .268 DW - 1.046

(40) OLS CS - 7.253 + .183 GET + 12.915 DUM (2.479) (.019) (1.457)

R2 - .9542 SLR - 2.461 DW - 1.459

2SLS CS - 6.967 + .186 GET + 12.816 DUM (2.509) (.019) (1.464) 525 (41) PS - DPI - CM - CA - CO

(42) OLS SG - 199.352 + .125 PS - .031 UPOPJ + 7.701 T (54.727) (.068) (.008) (1.098)

R2 - .9808 SER - 3.008 DW - 1.130 S'fiw:; £::-x j U o v a r i a b l e s n; t h e Czechoslovak econometric n o b e l

Data 1] Lsting in the CZEDB Symbol Definition page column

ALF « Agricultural economically active popula- 43 1

tion (labor force):

"... includes the armed and security forces, home workers, the self-employed, employed prisoners, and probably persons employed in confidential categories and frictional unemployment, all of whom are usually excluded^fron reported annual employment figures,"

Apprentices are also included, (thousand

persons)

3? = Balance of payments (billion 1967 KGs.) 30 3

CA = Consumption of agricultural goods and 69 1

food purchased out of final income

(billion 1967 KGs,)

CM = Consumption of manufactured goods pur— 70 1

chased out of final income (billion 1967

K«s.)

CO = Other consumption purchased out of final 67 2

income (billion 1967 KSs.)

CS = Social consumption (billion 1967 K5s.) 66 5

D = Government deficit or surplus (billion 23 2

1967 KSs.)

3 2 6 527 t-ymbol He'' in it ion page column

DPI = Disposable personal incone (billion 19^7 60 5

hes. )

HA = Average annual agrioul tural er-oloymsnt— 42 2

see 'JPOT for coverage (thousand persons)

EH = Avcrape annual mnnufacturing employment— 42 1

see STOT for coverage (thousand persons)

EO = Average annual other employment— see ETOT 42 3

for coverage (thousand persons)

UTOf = Average annual total employment in the 41 1

national economy:

"... Coverage— employed persons, co-op- erative fanners and members of their fam­ ilies (active in co-operative farm work), members of other co-op erp.tives, self-em­ ployed persons (independent fanners and others) together with associated members of their famalies. Family members giv­ ing occasional assistance and housewives with no other occupation are excluded. So are apprentices." (thousand persons)

EXPA = Agricultural exports: raw materials, live- 29 2

3tock and foodstuffs (billion 19^7 Kcs.)

EXPH = Manufacturing exports: nonagricultural 29 1

fuel and raw materials, machinery, equip­

ment and non-food consumer goods (bill ion

1967 K6s.)

GET * Total government expenditures (billion 22 3

1967 KSs.)

G131A = Government expenditures on goods: expendi- 22 1

tures in the national economy and on 3ymbol Definition

defense arr.1 safety less the wages fund

of the state budget and national commit-

tees (billion 1967 K6s.)

Other government expenditures: expendi­

tures on social and cultural services,

on administration, on courts and procura­

tors and on the wage fund of the state bud­

get and national committees (billion

1967 Kfis.)

GNY = Total national income:

"...the sun of values newly created in the course of one year. .•.Materially it equals the aggregate value of all con­ sumer goods production (raw materials and means of production) produced which in the course of the year exceed the consumption of means of production.— Only the produc­ tion of material goods and material servi­ ces (e.g., freight transport, repairs etc.) are included in the national income. Health services, educational services and state administrative, etc. are not included in the national income thus defined." (billion 1967 K6s.)

GNYA = National income created in agriculture—

see GNY for further elaboration (billion

1967 KSs.)

G?JYK = National income created in manufactur­

ing— see GNY for further elaboration

(billion 1967 K5s.)

GNYO = Other national income created— see GUY 329

■>frbol Deflrr-t ion page column

further elaboration (billion 19^7 I16s.)

IKPA = Agricultural imports : raw materials, 29

livestock and foodstuffs, (billion

1967 K£s.)

HEPM - iianuf acturing inports: nona.gricultural 29

fuel and raw materials, machinery, equip­

ment and non-food consumer goods, (billion

1967 Kcs.)

10 = Other investments— see IT for coverage

(billion 1967 K£s.)

IT = Total investment: coverage—

"...outlay on nev; fixed assets, and the expansion, reconstruction and renewal of existing fixed assets. Investment out­ lay includes expenditure on building and contracting work, purchases of machines and equipment inclusive of assembly cost. Expenditure on working instruments the service life of which is loss them one year, or the unit price less than 600. — K5s. has been excluded, Expenditure on the acquisition of land, existing build­ ings and structures, machines and instal­ lations already in service, the basic herd,, draught animals, etc. is likewise omitted."^ (billion 1967 K5s.)

KOLF = lion-agricultural economically active popu­ 43

lation (labor force)— see ALF for coverage

(thousand persons)

KSG s* Currency in circulation (money supply) 11

(billion 1967 K5s.) 330

Symbol Definition name column

::in:ia= '■'et inmigray ion to urban are j s : tota l 48 3

arrivals in urban are' g Lose t o t a l do­

pe rtu res (thousand per a cm )

OLY = Other miscellaneous income: agric-.il tural 9

sales from private plctc, loar.o, interest

on savings and miscellaneous income (b il­

lion 1967 K5s.)

P3 Personal savings (b illio n 19^7 KSu.) 13 5

R Total government revenue (billion 19^7 20 1

K cs. )

RLTC « Total ret-ail sales (b illion 19£7 lies,) 63 1

"...sales directly to the consumer for his ovrn use, receipts from reonirs of consumer goods, from re ta il bespoke ta ilo r­ ing, dressmaking, and kindred services, and the receipts of catering est-.bl ish- ments and hotels, boardin ; houses, etc. (Direct sales by industrial enterprises and other organizations to the consumer are permissible up to a stated lim it, and form a negligible proportion of total re­ ta il sales recorded.)"

3G Savings d e p o s its ( b i l l i o n 19&7 k c s .) 13 1

TO Direct (wage or income) taxes (billion 21 3

1967 K c s .)

TO Miscellaneous taxes and nayraents (b illion 21 4

1967 K c s .)

Profits taxes; payments from the social­ 21 2

ist rector less TTX (billion 19^7 Kcs.) 531 hymbol Def i nit ion page coliran

Trl -- Total porronal income (billion 19^7 60 2

T;iAl'J= hoeial and health insurance (transfer) 5^ 4

payments (billion 19^7 K5s.)

TTX = Turnover taxes (billion 1967 K£s.) 21 1

T WP = Total wage bill (billion 1967 Kcs.) 54 2

WKG = Average annual wage in manufacturing 56 2

(thousand. 1967 KSs.)

WOG = Average annual wage in the socialist 56 1

sector: proxy for the other sector wage

(thousand 1967 Kcs.) V.OG 'A)!: ir - jj a v r-

Tata listing in the C-livDB Symbol Definition page column

C?1AL= Go ;t of living (price) index for 9

all poods for all households: an average

of two indices, for workers* and employees'

households and for cooperative farmers'

households, weighted "by the nona.gr i cultural

wage bill and the agricultural wage bill

(respectively) (1967=100)

CPIFD= Cost of living (price) index for foodstuffs 9

for all households— see CPI1L for descrip­

tion of weighted average (19^7=100)

CPI3V- Cost of living (price) index for ser- 9

vices for all households— see CPIAL for

description of weighted average (1967=100)

DUI-I = Dummy variable: 1967 - 1972 = 1 , otherwise

othervise = 0

CKEA = Sun of the gross national products of Bui- 33

garia, German Democratic depublic, Hungary,

Poland, Komania and the U.S.S.H* (billion

U.S. current dollars)

IA Investment in agriculture— see endogeneous ?.

332 553

Symbol Definition page column

variable IT for coverae (billion I967

KSs,)

!!•' = Investment in manufacturing— 3ee endog- 1 4

eneous variable IT for coverage (billion

1967 Kcs.)

KA = Basic assets (zAklacLni prostredky) or 39 1

capital stock in agriculture— see KH

for a general description (billion 1967

Kcs •)

KT-I = Basic assets (z£kladni prostredky) or 38 4

capital stock in manufacturing:

"...Basic assets are independent ob­ jects ... or combinations of technolog­ ical or construction complexes that serve their productive purpose over the long term and their acquisition price is at least 3»000 KSs. Published data on basic assets are based on the results of a survey on the age structure of basic assets existing on or before January 1, 1968, in all socialist organizations. ... Also included are basic assets in personal and private ownership, but j_tho data^ do not cover value of herds of domestic g and draft animals, land and forests." (billion 1967 Ko b .)

PRV/OM= Participation rate of employed women ~ 50 4

ratio of employed women to the population

of working ages, 15-64 (percent)

ILPOPJs Rural (places with less than 2,000 44 334

Eh.Tibol Deflnit ion p -; ° column

inhabitants) population mid-year (thousand

persons)

T Time trend: t = 1 ,..., 20 for 1 9 5 3 , , 1972

UPOPJ= Urban (places with less than 2,000 inhabit— 44 3

ants) population mid-year (thousand per­

sons) KOTES TO ki>iy£ s .>l'A D

1 Myers 102 , p. 457.

2 Cap and Dubsky 27 * 19^9* p. 21*

3 Ibid.

4 Ibid., p. 22,

5 Ibid., p, 77*

6 Translated from 45 * 1974* p. 169.

555