Approved for Release: 2019/07/19 C05210421
Table 2
SPIOER Industrial Groupings
rZ£§fi§fiH§{§y
Ferrous metals
Nonferrous metals
Fuel
Electric power
Chemicals and petrochemicals
Wood, pulp, and paper products
Construction materials
Civilian machinery
Producer durables
Consumer durables
Military machinery
Light industry
Processed food
Industrial materials
Machinery
Consumer nondurables
production series reported in value terms are
computed on this basis."
The gross-output method of aggregation is mislead-
ing, however, because the values include some inter-
mediate product already counted elsewhere. For ex-
ample, this procedure counts the value of coking coal
used in manufacturing steel both in the output of the
coal industry and in that of the steel industry. If the
steel is used elsewhere in industry, the coking coal will
be counted again.
If the amount of double-counting of production is
constant and the industrial structure is stable, then
the bias in the computed growth rate is minimal since
the growth rate of value added and gross output of
each enterprise will be nearly identical. A small bias
" For a discussion of the two types of gross output measures, see
M. R. Eydel'man, Mezhnotraslevoy balans obshchestvennogo pro-
dukta, (Moscow: Statistika, 1966) pp. 200-203, A. I. Yezhov,
Statistika pramyshlennosti, (Moscow: Statistika, 1977), pp. 57-61,
and Vladimir G. Treml, Dimitri M. Gallik, Barry L. Kostinsky, and
Kurt W. Kruger, The Structure of the Soviet Economy: Analysis
and Reconstruction of the I966 Input-Output Table, (New York:
Praeger Publishers, 1972), pp. 45-46.
arises because the output of the separate enterprises
will be combined by gross-output weights rather than
value-added weights.”
The principal bias from double-counting arises, how-
ever, from increasing vertical specialization in the
production of a given commodity. This causes the
gross output of an enterprise to rise faster than value
added. The bias caused by this type of double-
counting is particularly severe over time, where the
economic structure is rapidly changing. By any stand-
ard, Soviet industry has grown rapidly over the last
three decades and the degree of specialization has
increased somewhat.
Soviet industry is notorious for its autarky. Because of
the vagaries of its distribution system, enterprise and
ministry managers want to control as much as possi-
ble the production and distribution of the material
inputs needed by their enterprises. Enterprises and
ministries frequently produce goods that clearly are
not their specialty. Soviet planners and academics
have long realized that this excessive vertical integra-
tion hampers efficiency, and there have been numer-
ous campaigns over the years to encourage specializa-
tion. To the extent these campaigns have been
efficacious, this would increase double-counting and
the upward bias of gross output as a measure of the
growth of industrial production.
The construction materials industry is a prime exam-
ple of how a changing industrial structure causes
double-counting to increase. At one time, most ce-
ment was shipped directly to the construction indus-
try. Soviet leaders decided, however, to “industrialize
construction” by fabricating as many construction
elements-—such as walls, bathroom units, and railroad
tracks—as possible in a plant instead of on site by the
construction industry. This means that much of the
cement is now converted into precast concrete pro-
ducts by other plants within the construction materi-
als industry, and a larger share of cement output is
now double-counted than formerly.
" For a discussion of the biases of gross-output measures and
double-counting, see Rush V. Greenslade, “lndustrial Production
Statistics in the USSR," pp. 155-194.
185
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