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Xerox University Microfilms 300 North Zaob Road Ann Arbor. Michigan 48106 I I 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