Capital accumulation, the soft budget constraint and Soviet industrialisation

Robert Allen

European Review of Economic History, 1998, vol. 2, issue 1, 1-24

Abstract: The article analyses the rapid development of the Soviet economy during the first three Five Year Plans. A simulation model is used to determine the importance of three distinctive Soviet institutions/policies – the concentration of investment on heavy industry, the collectivisation of agriculture, and the use of ambitious output targets in conjunction with soft budget constraints to guide business activity. It is shown that the investment strategy and the planning system were responsible for rapid industrialisation, including a significant rise in the standard of living. Collectivisation did increase the rate of growth over the 1930s but by only a small amount.

Date: 1998
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