BPEA | 1991 No. 2


1991, No. 2

Several panelists commented on the reasons Shleifer and Vishny
gave for the collapse in production in the Soviet Union. Merton Peck
agreed that repressed inflation probably suppressed output in earlier
years, but believed that reduced imports of essential inputs was now the
major factor crippling production. William Nordhaus suggested that the
importance of repressed inflation as the source of declining output might
be exaggerated by Shleifer and Vishny, recalling that repressed inflation
in Germany after World War II was even more severe but any output
decline was moderate.F urthermoret, he decrease in queues andt he similarity
of black market and tourist exchange rates provided evidence that
repressed inflation lessened after the April price reform, yet output continued
to decline. Finally, Nordhaus observed that the output decline
was severe in the important oil sector where the Shleifer-Vishny model
did not apply. Rather, oil production was apparently reduced because of
earlier failure to maintain and repair the fields. Franco Modigliani questioned
whether the diversion of intermediate goods from normal channels
was necessarily a major cause of the reduction in output. With the
goods moving from planned channels to other uses, the other uses may
simply be output that does not appear in official statistics or is badly
measured in them. In fact the diverted goods may be employed in more,
not less, productive uses. Shleifer responded that although some consumer
goods or inputs may be used for barter and omitted from official
statistics, the decline in the output of heavy machinery, machine tools,
and other nontradableg oods indicatesa legitimated ecline in Soviet production.