IDEAS home Printed from https://ideas.repec.org/a/aka/aoecon/v65y2015i1p27-50.html
   My bibliography  Save this article

Capital formation and economic growth under central planning and transition: A theoretical and empirical analysis, ca. 1920–2008

Author

Listed:
  • Péter Földvári

    (Utrecht University, Department of History and Art History, Utrecht, Netherlands)

  • Bas van Leeuwen

    (Utrecht University, Department of History and Art History, and at the International Institute of Social History, Utrecht, Netherlands)

  • Dmitry Didenko

    (The state corporation (Bank for Development and Foreign Economic Affairs) (Vnesheconombank), Moscow, Russia)

Abstract

According to the consensus view, it was primarily physical capital accumulation that drove economic growth during the early years of state socialism. Growth models incorporating both human and physical capital accumulation led to the conclusion that a high physical/human capital ratio can cause a lower economic growth in the long run, hence offering an explanation for the failure of socialist economies. In this paper, we show theoretically and empirically that according to the logic of the socialist planner, it was optimal to achieve a higher physical to human capital ratio in socialist countries than in the West. Using a VAR analysis, we find empirical confirmation that within the Material Product System of national accounting, the relative dominance of investment in physical capital accumulation relative to human capital was indeed more efficient than under the system of national accounts.

Suggested Citation

  • Péter Földvári & Bas van Leeuwen & Dmitry Didenko, 2015. "Capital formation and economic growth under central planning and transition: A theoretical and empirical analysis, ca. 1920–2008," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 65(1), pages 27-50, March.
  • Handle: RePEc:aka:aoecon:v:65:y:2015:i:1:p:27-50
    as

    Download full text from publisher

    File URL: http://akademiai.com/content/p04031431r373u1u/fulltext.pdf
    Download Restriction: subscription
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mark Harrison, 2014. "The Fundamental Problem of Command: Plan and Compliance in a Partially Centralized Economy," World Scientific Book Chapters, in: THE ECONOMICS OF COERCION AND CONFLICT, chapter 10, pages 305-323, World Scientific Publishing Co. Pte. Ltd..
    2. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766.
    3. Maddison, Angus, 2007. "Contours of the World Economy 1-2030 AD: Essays in Macro-Economic History," OUP Catalogue, Oxford University Press, number 9780199227204.
    4. Duczynski, Petr, 2002. "Adjustment costs in a two-capital growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 837-850, May.
    5. Bas van Leeuwen & Peter Földvári, 2013. "Capital Accumulation and Growth in Central Europe, 1920-2006," Eastern European Economics, Taylor & Francis Journals, vol. 51(5), pages 69-93, September.
    6. Dmitry Didenko & Péter Földvári & Bas van Leeuwen, 2013. "Inspiration and Perspiration Factors in Economic Growth: The Former Soviet Union Area versus China (ca. 1920-2010)," Global COE Hi-Stat Discussion Paper Series gd12-283, Institute of Economic Research, Hitotsubashi University.
    7. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-1067, December.
    8. B. Leeuwen & P. Földvári, 2011. "Capital accumulation and growth in Hungary, 1924–2006," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 61(2), pages 143-164, June.
    9. Bas Van Leeuwen & Peter Foldvari, 2008. "Human Capital and Economic Growth in Asia 1890–2000: A Time‐series Analysis," Asian Economic Journal, East Asian Economic Association, vol. 22(3), pages 225-240, September.
    10. Judson, Ruth, 2002. "Measuring Human Capital Like Physical Capital: What Does It Tell Us?," Bulletin of Economic Research, Wiley Blackwell, vol. 54(3), pages 209-231, July.
    11. Ellman,Michael, 2014. "Socialist Planning," Cambridge Books, Cambridge University Press, number 9781107074736, September.
    12. Easterly, William & Fischer, Stanley, 1995. "The Soviet Economic Decline," The World Bank Economic Review, World Bank, vol. 9(3), pages 341-371, September.
    13. Peter Duczynski, 2003. "On the Empirics of the Imbalance Effect," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 2(2), pages 121-128, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Miller, Marcus & Smith, Jennifer C., 2015. "In the shadow of the Gulag: Worker discipline under Stalin," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 531-548.
    2. E. Young Song, 2014. "Trade and the Speed of Convergence," Review of Development Economics, Wiley Blackwell, vol. 18(1), pages 1-12, February.
    3. repec:cge:wacage:2018 is not listed on IDEAS
    4. Leonard Kukić, 2024. "Technical change and the postwar slowdown in Soviet economic growth in a long run perspective, 1885–2019," Economic History Review, Economic History Society, vol. 77(2), pages 644-674, May.
    5. Leonard Kukić, 2021. "The Nature Of Technological Failure: Patterns Of Biased Technical Change In Socialist Europe," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 895-925, July.
    6. Bas van Leeuwen & Peter Földvári, 2013. "Capital Accumulation and Growth in Central Europe, 1920-2006," Eastern European Economics, Taylor & Francis Journals, vol. 51(5), pages 69-93, September.
    7. Luis Orea & Antonio Alvarez, 2022. "Alternative specifications of human capital in production functions," Economics and Business Letters, Oviedo University Press, vol. 11(4), pages 172-179.
    8. Mr. Ales Bulir & Ms. Zuzana Brixiova, 2001. "Growth Slowdown in Bureaucratic Economic Systems: An Issue Revisited," IMF Working Papers 2001/006, International Monetary Fund.
    9. Tamás Vonyó & Alexander Klein, 2019. "Why did socialist economies fail? The role of factor inputs reconsidered," Economic History Review, Economic History Society, vol. 72(1), pages 317-345, February.
    10. A. A. Aletdinova & A. V. Koritsky, 2020. "Comparative Analysis of the Return on Human Capital in the European and Asian Regions of Russia," Regional Research of Russia, Springer, vol. 10(2), pages 213-219, April.
    11. repec:ebl:ecbull:v:4:y:2007:i:38:p:1-12 is not listed on IDEAS
    12. Sergei Guriev & Barry W. Ickes, 2000. "Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000," William Davidson Institute Working Papers Series 348, William Davidson Institute at the University of Michigan.
    13. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
    14. Mark Harrison & Inga Zaksauskienė, 2016. "Counter-intelligence in a command economy," Economic History Review, Economic History Society, vol. 69(1), pages 131-158, February.
    15. Petr Duczynski, 2007. "A Note on the Imbalance Effect in the Uzawa-Lucas Model," Economics Bulletin, AccessEcon, vol. 4(38), pages 1-12.
    16. Paweł Bukowski & Filip Novokmet, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," Journal of Economic Growth, Springer, vol. 26(2), pages 187-239, June.
    17. Lehmbruch, B., 2012. "Transacting in the absence of trust : Uncertainty and network patterns in post-communism," ISS Working Papers - General Series 539, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    18. Kukic, Leonard, 2021. "Technical change and the postwar slowdown in Soviet economic growth," IFCS - Working Papers in Economic History.WH 33259, Universidad Carlos III de Madrid. Instituto Figuerola.
    19. Van Leeuwen, Bas & van Leeuwen-Li, Jieli & Foldvari, Peter, 2012. "Education as a driver of income inequality in twentieth-century Africa," MPRA Paper 43574, University Library of Munich, Germany.
    20. Van Leeuwen, Bas & van Leeuwen-Li, Jieli & Foldvari, Peter, 2011. "Regional human capital in Republican and New China: Its spread, quality and effects on economic growth," MPRA Paper 43582, University Library of Munich, Germany.
    21. Lehmbruch, B., 2012. "It takes two to quango: post-Soviet fiscal relations, political entrepreneurship and agencification from below," ISS Working Papers - General Series 538, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    22. DUDLEY, Leonard & RAUH, Christopher, 2018. "Innovation growth clusters: Lessons from the industrial revolution," Cahiers de recherche 2018-14, Universite de Montreal, Departement de sciences economiques.

    More about this item

    Keywords

    Central planning; capital accumulation; human capital; Soviet Union; national accounts;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aka:aoecon:v:65:y:2015:i:1:p:27-50. See general information about how to correct material in RePEc.

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

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

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

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kriston, Orsolya (email available below). General contact details of provider: https://akademiai.hu/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.