INDEXES OF PRICES OF CONSUMER GOODS AND SERVICES IN THE USSR 1928-58

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• Collection: General CIA Records
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• Release Decision: RIPPUB
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• Document Page Count: 46
• Document Creation Date: November 9, 2016
• Document Release Date: July 9, 1999
• Sequence Number: 1
• Publication Date: December 1, 1959
• Content Type: REPORT

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N? 82
RESEARCH AID
INDEXES OF PRICES
OF CONSUMER GOODS AND SERVICES
IN THE USSR
1928 - 58
CIA/RR RA 59-17
December 1959
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
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:.be meanaag of the espionage laws,
6JSC, Sees. "193 and 794, the trans.-
5 or revelation of which in any manner
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RESEARCH AID
INDEXES OF PRICES OF CONSUMER GOODS AND SERVICES IN THE USSR
1928-58
CIA/RR RA 59-17
Office of Research and Reports
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This research aid provides a brief but comprehensive view of con-
sumer prices (the prices of consumer goods and services) in the USSR
during 1928-58. The research aid presents an index of consumer prices
and indexes of the three main components of these prices, as follows:
(1) consumer goods in state and cooperative stores, (2) consumer goods
in collective farm markets, and (3) consumer services. Trends in con-
sumer prices are described and interpreted, and an assessment is made
of Soviet policies as reflected in these trends.
The indexes of the prices of consumer goods are based mainly on
official Soviet indexes, but certain gaps have been filled by indexes
derived from fragmentary data in official and other sources. The in-
dex of the prices of consumer services is derived from Soviet data on
prices and quantities sold.
As an aid to understanding the significance of the indexes, a
description of the important types of consumer prices in the USSR is
included, emphasis being placed on the ways in which these prices are
currently set. Technical material dealing with the evaluation and
methods of construction of both the official and the calculated indexes
has been relegated to Appendix A whenever possible.
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CONTENTS
Summary . . . . . . . . . . . . . . . . . . . . . . . . 1
I. Introduction . . . . . . . . . . . . . . . . . 2
II. Movements of Consumer Prices, 1928-58 . . . . . . 4+
A. Period of Increasing Prices, 1928-47 . . . . . 4
B. Period of Declining Prices, 19+8-54 . . . . . . 7
C. Period of Stable Prices, 1955-58 . . . . . . . 9
III. Official Policy on Consumer Prices . . . . . . . . 9
IV. Consumer Markets . . . . . . . . . . . . . . . . . 11
A. State and Cooperative Trade . . . . . . . . . . 11
1. Organization . . . . . . . . . . . . . . . 11
a. State Trade . . . . . . . . . . . . . . 11
b. Cooperative Trade . . . . . . . . . . . 12
2. Price-Setting . . . . . . . . . . . . . . . 12
3. Geographic and Seasonal Variations in
Prices . . . . . . . . . . . . . . . . . . 13
a. Zonal . . . . . . . . . . . . . . . . . 14+
b. Urban-Rural Differential . . . . . . . 14+
c. Seasonal . . . . . . . . . . . . . . . 14
B. Collective Farm Market . . . . . . . . . . 15
C. Consumer Services . . . . . . . . . . . . . . . 15
Appendixes
Appendix A. Methodology . . . . . . . . . . . . . . . 17
Appendix B. Gaps in Intelligence . . . . . . . . . . . 35
Appendix C. Source References . . . . . . . . . . . . 37
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1. Indexes of the Prices of Consumer Goods and
Services in the USSR, Selected Years,
1928-58 . . . . . . . . . . . . . . . . . . . 4
2. Indexes of Prices in Collective Farm Markets
and of State and Cooperative Food Prices in
the USSR, Selected Years, 1928-58 . . . . . . 6
3. Indexes of State and Cooperative Prices in
the USSR, Selected Years, 1928-58 . . . . . .
4. Indexes of the Prices of Selected Commodities
in the Collective Farm Markets in Selected
Areas of the USSR, 1956 . . . . . . . . . . .
Following Page
USSR: Indexes of the Prices of Consumer Goods
and Services, 19+7-58 . . . . . . . . . . . . . . 2
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INDEXES OF PRICES OF CONSUMER GOODS AND SERVICES IN THE USSR*
192b-5b
Summary
The rapid growth of the economy of the USSR was marked by wide
fluctuations in consumer prices,** which rose rapidly during 1928-47,
declined even more rapidly during 1948-54, and have remained relatively
stable since 1954. These fluctuations resulted from changes in Soviet
monetary and fiscal policies as well as in retail price policies. The
indexes of consumer prices are shown graphically on the chart.***
During 1929-47, consumer prices increased approximately 21 times,
as the Soviet government permitted money wages to increase far more than
the available supply of consumer goods and services. State and co-
operative prices were raised 23 times and the prices of consumer serv-
ices 3.4 times. These increases, however, were not sufficient to offset
the rise in purchasing power, and the consequent development of excess
demand led to a 53-fold increase of prices in collective farm markets.
During 1948-54, consumer prices were reduced to 43 percent of their
level in 1947. This reduction was made possible by the success of the
regime in combating inflation through currency reform, the stabiliza-
tion of wages, and the achievement of substantial increases in the
supply of consumer goods and services. State and cooperative prices
were reduced to 43 percent of their level in 1947, and prices in col-
lective farm markets declined to 29 percent of their level in 1947.
The prices of consumer services were increased slightly. In collective
farm markets the decline in prices took place between 1947 apd 1950.
During 1950-54, reductions in state and cooperative prices were more
than could be justified by the increase in the supply of consumer goods
and services and, by creating excess demand, prevented a further decline
in prices in collective farm markets.
* The estimates and conclusions in this research aid represent the
best judgment of this Office as of 1 October 1959. The word prices in
this research aid refers to retail prices unless otherwise indicated.
-* The term consumer prices in this research aid refers to the prices
of consumer goods and services.
*** Following p. 2.
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During 1955-58, consumer prices remained stable, and this stability,
together with the continued increase in the supplies of consumer goods
and services, forced down prices in collective farm markets by reducing
excess demand. This trend in consumer prices may presage a deliberate
shift from the Stalinist policy of maintaining a permanent "seller's
market" for consumer goods and services and toward a permanent elimi-
nation of excess demand.
Official* indexes of state and cooperative prices during 1928-48,
when compared with an independently constructed index, appear to be
reasonably reliable if account is taken of formula bias in the index
for 1928-37. There is no positive evidence of significant distortion
in the official indexes of state and cooperative prices for 19+9-58.
In the official index of collective farm market prices, there appears
to be a fairly wide margin of error arising from the methods used in
collecting the data.
The purpose of this research aid is threefold: (1) to construct
a combined index of the prices of Soviet consumer goods and services,**
(2) to evaluate the reliability of the index with particular emphasis
on those components obtained directly from official sources, and (3) to
assess the official Soviet policy on consumer prices reflected in the
movements of the consumer price index and its principal. components.
The consumer price index and its component indexes, in addition to
their intrinsic value, are of use as deflators of money wages and, as
such, provide an indication of trends in the proportion of real income
which the Soviet worker spends on goods and services. The indexes also
can be used as deflators for the corresponding parts of the consumption
sector of the gross national product (GNP). Both the sensitivity of
the index to year-by-year changes and the accuracy of its long-run
trend are uncertain, however, because of unmeasurable changes in quality
and because the prices of services in the USSR have been particularly
unresponsive to market demand.
* The term official in this research aid refers to information, data,
statistics, or indexes published by the Soviet government or otherwise
substantiated by overt or tacit acceptance by the government and to
activities of the Soviet government or those having the sanction of the
government.
** The combined index of the prices of Soviet consumer goods and serv-
ices is referred to in this research aid as the consumer price index.
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CONFIDENTIAL
400
380
360
340
320
300
280
0
6
1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958
f
Consumer
USSR: Indexes of the Prices o
58
1947
i
d S
d
ces,
erv
-
s an
Goo
~.~.~ Prices of all consumer goods and services
State and Cooperative prices
Prices of consumer services
Collective farm market prices
-1950= 100
9
-
28079 11-59 SONIIFENTIAL
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This research aid has made considerable use of previous work on
Soviet consumer prices by Janet Chapman. /* The differences between
the present index and the Chapman index are discussed in Appendix A.**
The consumer price index presented here includes prices paid by
Soviet consumers for goods and services which they purchase in the
market. Excluded from the index are the imputed prices of goods and
services which are not supplied to the population through regular
market channels. Examples of such excluded goods and services are
farm income in kind, imputed rents on owner-occupied dwellings, and
services such as health services and education which are supplied to
the population mainly free of charge.
The consumer price index presented in this research aid is com-
posed of three indexes: first, and quantitatively the most important,
an index of the prices of consumer goods sold in state and cooperative
stores; second, an index of the prices of consumer goods sold in the
collective farm markets; and, third, an index ofeiprices
sfoftcon-
sumer services. Except for the period 1928-37, the
cooperative prices presented here the Soviet
index pub-
lished the years 191+0, 1947, and 1950-58 lished explicitly in recent statistical handbooks, the only change
being a shifting of the base year. For the remaining years, the index
of state and cooperative prices is that index implied by official
Soviet data, which was derived by dividing total state and cooperative
sales expressed in current prices by the official index of the volume
of sales expressed in constant prices.* For the years 1928-37 the
index thus derived was adjusted to take account of substantial formula
bias.
The index of collective farm market prices is the official index
for the years 191+0, 191+7, and 1950-58, the only change being a shifting
of the base year. The index of prices in collective farm markets for
the years 1928, 1937, and 191+8 was estimated from data on the relation
of prices in collective farm markets to state and cooperative food
prices.
The index of the prices of consumer services in this research aid,
an extension of the Chapman index, was computed from data on prices
and quantities derived mainly from official sources.
For serially numbered source references, see Appendix C.
P. 17, below.
Because the price index thus derived is implied directly by of-
ficial data, the index is referred to in this research aid as the
official index.
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II. Movements of Consumer Prices, 1928-58
A. Period of Increasing Prices, 1928-47
In 1929 the USSR, under the first of a succession of Five
Year Plans, embarked on a program of forced industrialization,
which achieved remarkable results by Western standards. The rapid
progress achieved during 1929-40, when GNP increased about 5 per-
cent per year, / was accompanied by a sharp inflation in which the
prices of consumer goods increased seven times, as shown in Table 1.
a. For details on the construction of indexes presented
in this table, see Appendix A.
b. Average of the indexes of the prices of consumer goods
and consumer services, based on 1955 weights.
c. Average of the indexes of the prices of consumer goods
in state and cooperative stores and in the collective farm
market, based on 1955 weights.
- 4
Indexes of the Prices of Consumer Goods and Services
in the USSR al
Selected Years, 1928-58
1950 = 100
Year
Prices of
All Consumer
Goods and Services
Prices of
Consume
Goods
Prices of
Consumer
Services
1928
8.o
7.1
22
1937
45
45
44
1940
N. A.
57
N. A.
1947
180
185
97
1948
135
137
98
1950
100
100
100
1951
93
93
100
1952
89
88
100
1953
8o
79
100
1954
78
76
100
1955
78
6
1956
77
7
75
100
100
1957
77
1958
79
75
77
100
100
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Further inflation occurred during World War II, and by 1947, when
prices of consumer goods reached their peak, the level was 26 times
that of 1928. The effective increase in prices would be even great-
er if reductions in quality that took place during the period were
taken into account.
The main cause of the inflation was a vast, unplanned increase
in money wages accompanying the drastic reallocation of resources en-
tailed in industrial expansion, together with a much smaller increase
in the supply of consumer goods and services available through market
channels to the population. During 1929-47 the urban labor force
approximately tripled, and the average money wage of workers and em-
ployees increased nine times. The increase in average money wages
resulted from a growing scarcity of skilled labor, a relatively high
level of labor mobility, inadequate state control over wage rates, and
a laxity in state control of credit to industrial enterprises which
permitted factory managers to bid up wages for scarce labor in order
to fulfill their plans for production.
The greatest impact of the increase in purchasing power in
excess of the supply of consumer goods and services was felt in the
collective farm market where prices are not regulated directly by the
state. Over the period as a whole the regime failed to raise the
prices of consumer services and state and cooperative prices to levels
commensurate with the increased purchasing power and thus permitted
the development of excess demand- for goods and services. When the
quantity of goods supplied to the collective farm markets did not in-
crease significantly, prices in collective farm markets were forced
upward sharply.
During 1929-47, prices in collective farm markets are esti-
mated to have increased 53 times, as shown in Table 2.* During the
same period, state and cooperative prices increased 23 times, as shown
in Table 3,** whereas prices of consumer services increased only
3.4 times. The increase in state and cooperative prices was the result
mainly of a large increase in wholesale prices but also reflects in-
creases in turnover taxes. From 1928-29 to 1948 the average rate of
turnover tax* on goods purchased in state and cooperative stores in-
creased from 22 percent to 64 percent of the value of goods sold.
Table 2 follows on p. 6.
Table 3 follows on p. 7.
The average rate of turnover tax is defined as the ratio of re-
ceipts from turnover taxes from the sale of consumer goods to total
state and cooperative retail sales. Receipts from taxes in 1928-29
represent the sum of receipts from commodity taxes later combined into
the turnover tax when it was formally adopted in 1930. J
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Indexes of Prices in Collective Farm Markets
and of State and Cooperative Food Prices in the USSR J
Selected Years, 1928-58
Year
Index of Prices
in Collective
Farm Markets
(1950 = 100)
Index of State
and Cooperative
Food Prices
(1950 = 100)
Ratio of Prices in
Collective ];arm Markets
to State andCooperative
Food Prices b/
1928
6.6
5.6
:x.36
1937
42
43
1.10
1940
96
50
2.24
1947
357
182
2.30
1948
168
142
1.35
1950
100
100
1-17
1951
101
89
1.33
1952
100
82
l.43
1953
93
72
1.51
1954
104
70
1-74
1955
104
70
1.74
1956
93
70
1.53
1957
9o
71
1.48
1958
95
73
1.52
a. For details on the construction of indexes presented in this
table, see Appendix A.
b. The ratios for the years 1928, 1937, and 1948 were computed
from data on Moscow prices of comparable commodities,in the two
markets. The ratio for 1955 was derived from official data re-
lating food prices in commission stores in 1955 to both state and
cooperative and collective farm market prices. The ratios for
the remaining years were derived from the ratio in 1955 on the
basis of the relative trends of prices in the two markets. For
detailed discussion, see Appendix A.
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Indexes of State and Cooperative Prices
in the USSR
Selected Years, 1928-58
Year
Prices of
All Commodities
Prices of
Food
Prices of
Nonfood Goods
1928
7.1
5.6
9.3
1937
45
43
47
1940
54
50
61
1945
127
N. A.
N. A.
1946
151
N. A.
N. A.
191-7
173
182
152
1948
135
11+2
123
191+9
121
N. A.
N. A.
1950
100
100
100
1951
92
89
95
1952
87
82
95
1953
78
72
87
1954
74
70
80
1955
74
70
81
1956
74
70
8o
1957
74
71
80
1958
76
73
80
a. Including restaurant prices and prices charged by commis-
sion stores of the Central Union of Consumer Cooperatives
following their inception in 1953. For details on the con-
struction of indexes presented in this table, see Appendix A.
B. Period of Declining Prices, 1948-54
Since World War II the Soviet economy has achieved a rate of
increase in GNP even higher than in prewar years, amounting to 7 per-
cent per year during 1950-58. / In spite of this increased rate of
growth, the Soviet government has been successful in combating in-
flationary pressures and has reduced consumer prices substantially
below their 1947 peak. Money wages were stabilized through centralized
regulation of wage scales, through tightening of credit to industrial
enterprises, and through restrictions on labor mobility. During
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1949-54 the average money wages of urban workers and employees in-
creased only 11 percent. The supply of consumer goods through market
channels, however, is estimated to have increased about 40 percent
per capita. J
During 1948-54, consumer prices were reduced to 43 percent of
their level in 1947. This reduction was composed of a reduction of
the prices of consumer goods to 41 percent of their level in 1947 and
little change in the prices of services. The effective reduction
would be somewhat greater if account were taken of improvements in the
quality of consumer goods during the period.
Collective farm market prices declined to 29 percent of their
1947 level during the period 1948-54, a reduction much greater than
that of state and cooperative prices. This decline in collective
farm market prices, which occurred mainly in the years 1947-50, was
caused by a sharp increase in the supply of consumer goods and by
monetary and price measures during 1947-50. At the end of 1947, the
Soviet government, to permit the abolition of rationing, introduced a
currency reform that eliminated the "forced" savings that the popu-
lation had accumulated during the war years in the form of currency
and bank deposits. In addition, prices of rationed goods in state and
cooperative stores were increased and prices of nonrationed goods in
state and cooperative stores were reduced by 1948, with the net effect
of reducing average state store prices to 78 percent of those in 1947.
These actions, together with further reductions of state and cooperative
prices and with increased supplies of consumer goods and services in
state and cooperative stores, caused collective farm market prices to
decline more than state and cooperative food prices. By 1950, collec-
tive farm market prices were only about 17 percent more than state and
cooperative food prices as is shown in Table 2.* This small differ-
ential, however, was not maintained. During 1951-55 the Soviet govern-
ment further reduced state and cooperative prices to 74 percent of those
in 1950, a reduction which increased the demand for consumer goods more
rapidly than the supply, thus preventing a corresponding decline in
collective farm market prices. Although the supply of goods on the
collective farm market increased during 1951-55, the spread between col-
lective farm market prices and state and cooperative food prices in-
creased, and by 1955 collective farm market prices were 74 percent more
than state and cooperative food prices. Excess demand for nonfood con-
sumer goods at prevailing prices was evident in the widespread "short-
ages" reported during most of the period.
The reductions in state and cooperative prices were effected
largely by reducing the rates of turnover taxes. From 1948 to 1957 the
P. 6,, above .
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average rate of turnover tax on goods purchased in state and coopera-
tive stores declined from 64 percent to 44 percent of the value of
goods sold.
C. Period of Stable Prices, 1955-58
In 1955 the Soviet government abandoned the policy of making
general, across-the-board reductions in consumer prices in favor of
maintaining stability in the general level of consumer prices. The
new policy calls for reductions in the prices of individual commodities
when justified by reductions in costs of production, but few price re-
ductions have been made. These reductions generally have applied to
consumer durable goods of limited consumption and have had no percepti-
ble effect on the general level of state and cooperative prices. Since
the adoption of the new policy, stable state and cooperative prices,
together with substantial increases in the supply of consumer goods
and services, have forced down prices in the collective farm market by
reducing the gap between the quantity of consumer goods demanded and
the quantity supplied at prevailing state and cooperative prices.
Events of 1958 appear to demonstrate that the Soviet government
intends to adhere rigidly to the present conservative price policy.
Early in 1958 the Soviet government, in an effort to reduce the "adverse
effects on labor productivity" of excessive consumption of vodka, raised
the prices of vodka product-s substantially. Other price increases at
that time included those on automobiles, motorcycles, and carpets. Al-
though occasional reductions were made during the year on items such as
children's clothing and some types of fish, these reductions were not
sufficient to offset fully the price increases. Thus, in spite of the
obvious propaganda disadvantages of such a course, the general level of
state arid- cooperative prices was allowed to increase by 2 percent.
III. Official Policy on Consumer Prices
In spite of extensive rationing since 1928, the Soviet government
has indicated in its performance that it prefers the use of the market
mechanism rather than rationing in controlling the distribution of con-
sumer goods, and, although to a lesser extent, most consumer services
except housing. During the extreme upheaval of the First Five Year
Plan and of collectivization of agriculture during 1928-33 and again
during and shortly after World War II, when large increases in purchas-
ing power were associated with declines or only small increases in the
supply of consumer goods, the state employed rationing as an emergency
measure to ensure that available supplies of consumer goods were dis-
tributed in accordance with the interests of the stte. On in was accordance withowever, in 1935-36 and again in 1947, as soon
the state abolished both rationing and the need for it by eliminating
most of the accumulated excess demand.
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The pricing of principal consumer services appears to be far
more arbitrary than pricing of consumer goods. Equating the quantity
of consumer services demanded with the supply available has been
accomplished mainly through a variety of formal and informal relation-
ing devices, varying from quantitative allocations made on the basis
of square meters of floor space per family member in the case of
housing, to a simple first-come, first-served arrangement in the case
of some transportation and many recreational and personal services.
`There is also evidence of the widespread use of bribes and other il-
legal payments for the allocation of housing space.
The Soviet government refuses to tolerate extreme disparities be-
tween purchasing power and the available supply of consumer goods,
but until 1955 it showed little concern for lesser disparities in
spite of the advantages of avoiding them. The basis onwhich these
disparities are measured is the ratio of the prices of comparable com-
modities in the collective farm market to those in state and coopera-
tive stores. Prices in the two markets are available for 1928, 1937,
and 1948. Ratios of prices of individual commodities have been ag-
gregated to obtain over-all ratios of collective farm market prices
to state and cooperative store prices for those years. Also, it has
been possible to derive the aggregate ratio for 1955 from data on the
ratio of commission-.-tore food prices to both collective farm market
prices and state and cooperative store prices. The results of these
computations are presented in Table 2.*
To permit the abolition of rationing in 1935-36, the state elimi-
nated most of the excess purchasing power by sharply increasing state
and cooperative prices, which, together with increases in the available
supply of consumer goods and services, forced collective. farm market
prices and state and cooperative prices into approximate equality.
This parity was not maintained. During 1937-40 the failure to increase
state and cooperative prices commensurately with increases in purchasing
power again led to the development of excess purchasing power. This
excess purchasing power, together with the decline in supplies in the
collective farm market, forced collective farm market prices to increase
about 130 percent above those of 1937.
During 1950-54 the approximate equality between collective farm
market prices and state and cooperative food prices, obtained primarily
as a result of the currency reform of 1947, again was not maintained.
The state deliberately increased excess purchasing power, and thus the
* P. 6,, above.
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spread between collective farm market prices and state and cooperative
food prices during this period, by reducing state and cooperative food
prices more than was justified by increased supply.
The shift in 1955 to a policy of maintaining stability of consumer
prices may reflect, however, a determination on the part of the regime
to eliminate excess purchasing power entirely in the near future, thus
eliminating queuing for nonfood goods and the two-price system for
food. Elimination of excess purchasing power could be achieved by
continuing the present policy of holding state and cooperative prices
stable, as is implied by the Seven Year Plan, while limiting increases
in money wages to less than the increases attained in the supply of
consumer goods and services.
The principal advantage to the state of eliminating excess pur-
chasing power is its potential effect in increasing worker incentives.
The average worker is likely to work harder for a cash bonus if he is
certain that he can purchase readily the goods he wants with it than
if the bonus merely entitles him to stand in a queue or to place his
name on a waiting list. The disadvantage to the state is that, as
excess demand declines, increasing buyer resistance could force the
state to pay far greater attention to the tastes and preferences of
the population than it does now in the production of consumer goods
and services.
IV. Consumer Markets
A. State and Cooperative Trade
1. Organization
a. State Trade
The network of state retail trade in the USSR, which
in 1958 accounted for 69 percent of total state and cooperative sales,
presently comprises the retail outlets and restaurants which, until
1957, were subordinate to (1) the Ministry of Trade; (2) the Main
Administrations of Workers' Supply of the industrial ministries and
the Ministries of Transportation and Construction; (3) the Ministries
of Health, Communications, and Culture; and (1) republic ministries
and miscellaneous state organizations.* J
* Republic ministries and state organizations include procurement
organizations, republic ministries of local and fuel industry, organi-
zations of the ministries of municipal services, and others. In 1955,
retail outlets and restaurants subordinate to the Ministry of Trade ac-
counted for 68 percent of total state retail sales; those subordinate
to the Main Administrations of Workers' Supply, 27 percent; those sub-
ordinate to the Ministries of Health, Communications, and Culture, 3
percent; and those subordinate to republic ministries and other state
organizations, 2 percent. J
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During 1957-58, control of those outlets which up to that time were
subordinate to the Ministry of Trade was transferred to the republic
ministries of trade and to oblast and city councils. This transfer
was completed by November 1958, when the Ministry of Trade was abol-
ished.
Control of those outlets subordinate to the Main Ad-
ministrations of Workers' Supply of the industrial ministries -- most
of which were abolished in 1957 -- and the Ministries of Transportation
and Construction apparently has been transferred to the sovnarkhozy
(Sovety Narodnogo Khozyaystva -- regional Councils of the National Econ-
omy) of the economic regions* in which they are located. Control of
the remaining outlets remains largely unchanged.
b. Cooperative Trade 9
The network of cooperative retail trade in the USSR,
which in 1958 accounted for 31 percent of total state and cooperative
retail sales, comprises retail outlets and restaurants subordinate to
(1) the Central Union of Consumer Cooperatives, which operates mainly
in rural areas, and (2) retail outlets and restaurants of producer co-
operatives, subordinate to Central Producers' Councils of each republic.
In 1958, outlets of the Central Union of Consumer Cooperatives accounted
for 98.3 percent of total cooperative sales, and producer cooperatives
accounted for the rest.
Outlets subordinate to the Central Union, of Consumer
Cooperatives include commission stores established in 1953 to sell food
products in urban areas. Commission stores sell commodities obtained
from collective farms and individual farmers in return for commissions
paid to them by the producer at rates set by the government. In 1958
the average rate of commission was 9 percent. In 1958, commission
stores accounted for 4 percent of total cooperative retail sales.
2. Price-Setting 10
Setting of state and cooperative prices is subject to tight
central control. The general level of state and cooperative prices as
well as the specific prices of principal commodities** is determined by
the Council of Ministers on the basis of data supplied by the State
* The term region in this report refers to the economic regions
defined and numbered on map 27052 (7-58), USSR: Political-Administrative
Divisions and Economic Regions, March 1958.
** These commodities include bread, flour, meat, sugar, vodka, textile
fabrics, footwear, knitwear, and durable consumer goods.
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Planning Committee (Gosplan) and the Central Statistical Administra-
tion.* The setting of prices of other consumer goods (amounting to
4+5 percent of total state and cooperative sales) is delegated to the
councils of ministers of the union republics, which in turn may fur-
ther delegate it to republic planning committees (gosplans), republic
,ministries of trade, sovnarkhozy, and oblast and city councils. At
present the delegated price-setting is carried out in most republics
directly by republic councils of ministers on the basis of data sup-
plied to them mainly by the republic ministries of trade, although
in a few republics the data are supplied directly by the sovnarkhozy
or republic producing ministries.
The delegation of price-setting by the Council of Ministers
is more nominal than real, however, because price-setting at the re-
public level is permitted to be conducted only within very narrow
limits. The price-setting activities at the republic level relate
primarily to setting prices on products newly produced within the re-
publics, equalizing the prices of identical commodities sold within
the republics, and effecting temporary price changes to dispose of
surpluses or to eliminate shortages. The new prices set and prices
charged are subject to statistical supervision by the Central Statis-
tical Administration.
Prices charged for food by commission stores of the Central
Union of Consumer Cooperatives are set by a different process. These
prices are determined by agreement between the cooperative and collec-
tive farms and the individual farmers from whom they receive agricul-
tural products to be sold on commission. The agreed prices, however,
are subject to a limitation set by the Soviet government and enforced
by the Central Statistical Administration that they be lower than prices
of comparable goods on nearby collective farm markets.
3. Geographic and Seasonal Variations in Price.s ll
State and cooperative prices of a number of important com-
modities are set at significantly different levels according to geo-
graphic location of sale. In the case of a few important agricultural
commodities, state and cooperative prices are set at different levels
according to season. These price differentials apply mainly to commodi-
ties the prices of which continue to be set by the Council of Ministers.
The Ministry of Trade also participated in setting retail prices
until its abolition in November 1958.
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Zonal differentials in the prices of some individual
commodities,'* the production costs of which vary widely because of the
location of natural resources (such as food products) or on which
transportation costs are a large proportion of total cost (such as
furniture), are established by the Council of Ministers.
At present the USSR is divided into three price zones
for most food products, and typical price differentials between the
lowest and the highest price zones vary from 7 percent in the case of
butter to 24 percent in the case of sugar. The price zones take
roughly the form of concentric circles surrounding the region having
the lowest costs of production with the lowest price at the center and
the higher prices toward the extremes. The location of these zones
differs widely among the commodities. Moscow and Irkutsk, for example,
are in the second price zone for about one-half of the commodities
subject to zonal pricing, whereas Murmansk is in the third price zone
for about one-half of these commodities.
b. Urban-Rural Differential
Prices on some commodities** are at present 7 percent
higher in rural districts than in urban areas, thus allowing for
greater transportation costs to these presumably remote areas. This
differential is currently under attack because of its arbitrariness
and because it encourages collective farmers to take time from their
work by coming to urban areas to do their shopping and also because
it encourages "speculation" (arbitrage) in rural areas adjacent to
urban markets. Recommendations for abolition of the arbitrary
urban-rural differential have included suggestions that actual
transportation charges be added to the established state and co-
operative prices in remote areas.
Seasonal variations in prices are established by the
Council of Ministers on a number of important agricultural products ,-
the production and hence the availability of which varies during the
* At present, products subject to zonal pricing include bread, meat,
fish, sugar, confections, salt, canned goods, and furniture.
- These commodities include sugar, confections, textile fabrics,
sewn clothing, knitwear, footwear, soap, kerosine, matches, and other
items. In the case of sugar and confections, for which zonal price
differentials have been established, the urban-rural differential is
in addition to the zonal differential.
These commodities include milk and milk products, eggs, potatoes,
vegetables, fruit, and melons.
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seasons of the year. The seasonal variation is set so that the price
is lowest during the harvest and increases between harvests.
B. Collective Farm Market
The collective farm market consists of individual market places
or bazaars located in most cities and villages throughout the USSR.
Food products remaining to collective farms and to individual members
after compulsory sales to the state can be sold in the collective farm
market at uncontrolled prices.* First organized in 1932, the collec-
tive farm market is the successor to private food trade which was per-
mitted during the New Economic Program of the 1920's but which was
suppressed briefly in 1931. In 1958 the urban collective farm market
accounted for 6 percent of total retail sales.** 12
The index of collective farm market prices is composed of in-
numerable movements of prices in collective farm markets in individual
geographical areas which are diverse in both extent and direction in
response to local demand and supply conditions. Table 4** shows such
movements for a few local areas and compares them with the over-all
index of collective farm market prices.
C. Consumer Services
The consumer services discussed in this research aid consist
of services which are provided to households in the USSR in return for
cash outlays. The specific groups of services included and their
relative importance in total household expenditures on services in
1958 are listed in the following tabulation L32:
Billion Rubles
Percent
53.3
100.0
Rent of state-owned housing
5.0
9.4
Utilities (such as electricity and water)
7.4
13.9
4
Transportation
23.1
3.3
Communications
7.1
13.3
4
8
Recreation
7.9
.
1
Personal services
2.8
5.3
Food products typically sold in the collective farm market include
meat, fruit, vegetables, dairy products, and flour and other grain
products.
The index of collective farm market prices presented in this re-
search aid is limited to urban collective farm markets, sales in which
account for about 75 percent of total collective farm market sales.
Price data are not available for village collective farm markets.
xxX Table 4 follows on p. 16.
*- Excluding repair services such as repair of clothing. Prices of
repair services are included in the index of state and cooperative
prices.
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Indexes of the Prices of Selected Commodities
in the Collective Farm Markets in Selected Areas of the USSR
1956
All
Meat
Vege-
Fresh
Area
Products
Products
tables
Potatoes
Milk
Butte
E
_
r
ggs
USSR
91
89
86
88
82
75
93
RSFSR
92
89
85
86
83
78
93
Central
Region
92
88
89
83
84
77
93
Ural
Region
91
92
90
102
82
78
92
Ukrainian
SSR
90
81+
87
81
76
67
92
Belorussian
SSR
99
100
101
95
88
90
102
Armenian
SSR
lot+
93
lot+
92
97
91
99
Turkmen SSR
86
95
87
N.A.
93
88
87
a. LV
As in the case of prices of consumer goods in state and. co-
operative stores,* the setting of prices of consumer services is subject
to tight central control. The Council of Ministers establishes the
basic rate schedules for charging for consumer services on which basis
specific charges in individual cases are determined by oblast and muni-
cipal councils. In the case of housing, for example, the Council sets
the maximum rate to be charged per square meter and establishes an
elaborate schedule for use of oblast and municipal councils in deter-
mining specific rents per square meter below the maximum on the basis of
the quality, location, and other features offered in specific dwellings
as well as on the basis of the income of the household.
* See A,2, p. 12, above.
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APPENDIX A
METHODOLOGY
1. Index of State and Cooperative Prices
a. Derivation
The index of state and cooperative retail prices for 1940 and
1950-58 is the official index as published in source 15/. The only
change is that the base has been shifted to 1950. This index in-
cludes prices in restaurants and prices in commission stores of the
Central Union of Consumer Cooperatives following their inception in
1953. The index for 1928 and 1937 was derived by dividing official
data on total state and cooperative sales expressed in current prices
from source 16 by the official index of sales volume, in constant
prices, reported in source 17/. On the basis of an independent check,
the index for 1928 thus derived was adjusted to take account of for-
mula bias.*
The index for 1945-47 and 1948-49 was derived by the same
method as that above except that the index of sales volume was ob-
tained by chaining the percentage increases in sales volume reported
in the annual reports of plan fulfillment. No percentage increase in
sales volume over that in 1947 was reported for 1948 in the annual re-
ports of plan fulfillment. The link in the price index between 1947
and 1948 was reported, however, in source 18 .
The indexes of food and nonfood prices for 1940 and 1950-58
were derived from the same source as above. Because no official in-
dexes of the volume of sales of food and nonfood products are avail-
able for 1928, 1937, and 1948, the indexes of food and nonfood prices
for those years are based on the revised Chapman index.** In obtain-
ing the indexes of food and nonfood prices for 1928 and 1937, the re-
vised Chapman indexes of food and nonfood prices were adjusted by the
ratio of the combined Chapman index to the combined index of state and
cooperative prices used in this research aid. The indexes of food and
nonfood prices for 1948 were derived from the official index of state
and cooperative prices reported in source 19 by date of price reduc-
tion. Because the index of the prices of all commodities contained in
this source for 1948 is about 5 percent higher than the index derived
* For discussion of this adjustment, see b, p. 18, below.
** Revision of the Chapman index is discussed in c, p. 26, below.
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in the fashion described above, the indexes of food and nonfood prices
obtained from this source were reduced accordingly. The indexes of
food and nonfood prices for 1947 were obtained from source 20/.
Errors that may be present in the official index of state and
cooperative prices are divided into two main classes asfollows:
first, technical errors of index construction, which might result
from poor choice of formulas, inappropriate treatment of new products,
or lack of representativeness in the sample of prices included in the
index, and, second, deliberate distortions designed to avoid disclos-
ing developments believed to be prejudicial to the interests of the
Soviet government.
The Soviet method of constructing the index of state and co-
operative prices is discussed and a number of possible sources of
error are described in (1), below. A test is made of the degree to
which both possible sources of error are present in the official in-
dex in (2), below.
(1) Soviet Methods of Constructing the Index*
As has been discussed in IV, A,** in addition to changing
through time, state and cooperative prices in the USSR vary seasonally
as well as according to price zones and the urban-rural price differ-
ential. Most of these prices and the changes in them are available to
or are estimated*** by the Central Statistical Administration, which
constructs the index. The practice of estimating price changes for
old commodities is not believed likely to introduce a significant
amount of error. The importance of those prices affected, including
those charged in commission stores of the Central Union of Consumer
Cooperatives, is small in the index.**** The price changes having
the major impact on the index for most of the period covered in this
* The material on Soviet methods of constructing the index of state
and cooperative prices presented in this section is derived from source 21/.
** P. 11, above.
*** The exact translation is "imputed." Imputation of price changes
not available to the Central Statistical Administration may include im-
putation of price changes for new commodities. See the discussion of
the inclusion of new commodities appearing on p. 21, below.
**** Since 1953 the index of state and cooperative prices has included
prices in commission stores. Price changes in commission stores are ob-
tained on a crude sampling basis very similar to that used to obtain
price changes in collective farm markets. Soviet methods of constructing
the index of collective farm market prices are discussed in 2, b, p. 28,
below.
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research aid will be those implemented by governmental decrees which
will be available to the Central Statistical Administration.
Each retail outlet reports the ruble value of its sales of
each commodity. From these data, indexes are constructed for broad
commodity groups such as "bread and bread products" and "meat and meat
products" according to the following formula*:
E p1g1
E , (pIg1)
P1
where the numerator, pg1, is the actual ruble value of sales of the
commodities included in the group in the given year. The denominator,
P
E p? (p1g1), is the ratio of the price of each commodity in the group
in the base year to its price in the given year multiplied by the actual
ruble value of sales of that commodity in the given year. The formula
is a variant of the fundamental Paasche formula, because it employs
given year weights. To obtain the combined index of all state and co-
operative prices, the indexes of the prices of the individual commodity
groups are combined by the following formula:
E P1 Q1
EP? (P1Q1)
where the numerator, E P1Q17 is the actual ruble value of sales of all
Pa
commodity groups in the given year and the denominator, Z P1(PIQ,), is the
sum of the inverted price relatives for each of the commodity groups
multiplied by the actual ruble value of sales of that commodity group.
The official index of the physical volume of state and
cooperative retail sales is constructed according to the following
formula:
E P. Q1
E Po Qo
where the denominator, E Po Qa, is the actual ruble value of state and
* In the formulas and equations in this research aid, lower case let-
ters represent individual items and capital letters represent aggregates.
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cooperative sales of all commodity groups in the base year. The numera-
tor, E POQI, is the total ruble value of sales in the given year ex-
pressed in terms of base year prices. The numerator is computed by de-
flating the total actual ruble value of sales in the given year for each
commodity group by the inverted index of group prices, as follows:
Pt91 Ptgt PO (Pt qt) post
po(ptgt) Pt
and then summing the E Pogt's for all commodity groups. The formula for
the official index of the physical volume of state and cooperative re-
tail sales is a Laspeyres formula because it uses base year weights.
Soviet literature on index numbers of retail trade does not
specify precisely how the indexes of price or volume are combined into
continuous series covering periods of years, but there are indirect
indications that the official index may be a chain index. The two
principal alternative methods for combining successive years are as
follows:
where on
(a) Moving weight index:
Im EPnQn
on E Po Qn
is the moving weight index comparing prices
with given period "n".
(b) Chain index:
c _ E Pi Q-1 E P2 Q.2 E Pn Qn
Ion _ EPPQ1 XEPtQ2 X...X
E Pn-t Qn
inlbase period "o"
where Ion is the chain index comparing prices in base period "o" with
prices in given period "n."
Two indirect indications that the official index is a chain
index are as follows:
(a) In the years when state and cooperative prices were
reduced (mainly 1948-54), the Soviet government published data on the
annual "economies" to the population resulting from the price reductions.
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These "economies" are defined in Soviet statistical literature as
(E Pn-,Qn)-(E P. Q.) . The first term of the expression is a byproduct
of the chain index and would be readily available if the chain index
were regularly constructed. Because the first term is not, however, a
byproduct of the moving weight index and would have to be calculated
separately at the cost of a great deal of extra computation if the
official index were a moving weight index, it appears likely that the
official index is a chain index.
(b) A corollary of the use of the moving weight for-
mula for the index is that the index of sales volume derived from it
would be a fixed weight index. In connection with the discussion of
the index of sales volume, some Soviet texts on statistics contain a
digression describing the many problems encountered in the use of prices
of 1926-27 as weights in constructing the fixed weight index of indus-
trial production. If the official index of sales volume were also a
fixed weight index, it is reasonable to expect that this fact would be
mentioned in the above connection. No mention is made, however, that
the index of sales volume might also be a fixed weight index, the con-
struction of which would entail similar problems. This fact suggests
that the official index is a chain index.
Soviet literature on index numbers of retail trade also
fails to mention how new commodities are included in the indexes of
price or volume. There are two main alternatives: first, impute to
the new commodities the trend of prices of similar old commodities,
and, second, omit new commodities from the index. The second alter-
native would be practicable only if the official index were a chain
index, in which case new commodities would be included in the index
the second year they were on the market. In either case, some down-
ward bias would result from the inclusion of new products at given
year weights, because the prices of new products are likely to fall
more rapidly than the prices of other products. The extent of this
particular bias cannot be measured. It is, however, a factor in the
general bias of an index number using given year weights.*
(2) Reliability of the Official Index
Although assessment of the reliability of the official in-
dex of state and cooperative prices for the years since 1950 is of
greater intelligence interest than a similar assessment of the index
for the years before 1950, the main emphasis is this research aid is
* This general bias is discussed and roughly measured in (2), (a),
p. 22, below.
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placed on evaluation of the index for the earlier period for two rea-
sons: first, sufficient data for making an independent check of the
index are available only for 1928-48, and, second, it is thought that
conclusions as to the reliability of the index during the earlier
period might also apply to some extent to the more recent period.
For example, if it were determined that during the earlier period the
official index reflected with reasonable accuracy the large rise in
prices despite the large incentive from a propaganda point of view
to understate it, this accuracy would be evidence that the index also
is reasonably accurate during the more recent period when, because of
declining prices, there is probably less incentive from a propaganda
point of view to distort it.
(a) Indexes for 1928, 1937, and 1948
As was explained in a,* the index of state and coopera-
tive prices for 1928, 1937, and 1948, referred to hereafter as the offi-
cial index, was derived by dividing an index of total state and coopera-
tive sales expressed in current prices by the official index of sales
volume. The index derived by this procedure is subject to both types
of errors listed above.** To determine the extent of bias resulting
from all of these errors, the official indexes for these years are
compared with an independently constructed index of state and coopera-
tive prices which is a revision of the Chapman index.
In measuring changes between two time periods by means
of indexes, two index numbers can be calculated: the Laspeyres, using
base year weights, and the Paasche, using given year weights. In gen-
eral the results of the two calculations will differ, the extent of
the difference depending on the extent of change in relative prices and
quantities during the period. As was shown above,* the official index
is computed according to the Paasche formula using given year weights.
To determine the extent of bias resulting from all
possible sources except choice of formula, the independent index cal-
culated according to the Paasche formula should be compared with the
official index. In addition, to determine the extent of bias result-
ing from the use of the Paasche formula compared with the Laspeyres
formula, the independent index calculated according to the Laspeyres
formula should be compared with the official index. In the following
tabulation the official index for 1928, 1937, and 1948 is compared
with the independent indexes.
* P. 17, above.
See b, p. 18, above.
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1937 1948
(1928 = 100) (1937 = 100)
Official price index 538
Independent indexes
298
1928 weights 821
(Laspeyres)
1937 weights 597 321
(Paasche) (Laspeyres)
1948 weights 283
(Paasche)
Comparison of the official index with the independent
Laspeyres indexes indicates that for 1928-37 the official index has a
marked downward bias resulting from choice of formula but that bias
resulting from the other sources of error is much smaller and is con-
sidered to be insignificant and that for 1937-48 the bias from all
sources of error is minor. The large difference in the extent of for-
mula bias between the two periods is attributed to the fact that during
1928-37 there was an extreme variation among the price relatives,
whereas during 1937-48, when the USSR apparently attained a much tighter
central control over price movements, the variation among price rela-
tives was quite small. Because the data in the independent indexes are
less reliable and the sample much smaller for 1928-37 than for 1937-48,
the difference between the official and independent Paasche indexes
for 1928-37 is judged not significant. Hence the conclusion for the
entire period is that the official index is reasonably reliable if ac-
count is taken of formula bias for 1928-37.
In constructing the indexes presented in the tables in
this research aid, the official index for 1928-37 was adjusted upward
to approximate the arithmetic mean of the Laspeyres and Paasche indexes.
This adjustment was made by marking up the official index by one-half
the percentage that the Laspeyres form of the independent index ex-
ceeded the Paasche index. An analogous procedure also was followed
for the indexes for food and nonfood prices for this period.
Although there may have been some improvements in quality
in a few of the years during this period, quality of products sold prob-
ably declined in 1948 as compared with those in 1928. To the extent
such quality changes occurred the index presented in the tables in this
research aid understates the true increase in prices.
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(b) Indexes for 1940 and 1950-58
The index of state and cooperative prices for 1940
and 1950-58 is the official index as explicitly published, the only
change being a shifting of the base. It was determined' that this ex-
plicit index included prices in restaurants and prices in commission
stores of the Central Union of Consumer Cooperatives. This determi-
nation was made by computing the implied index for the same years by
dividing an index of total state and cooperative sales, including
restaurant and commission store sales, expressed in current prices
by the official index of sales volume. The implied index derived by
this method was indistinguishable from the official index published
explicitly.
Insufficient data are available for constructing an
independent index to use as a check of the official index for 1940
and 1950-58. It is necessary, therefore, to evaluate the reliability
of the index indirectly. To determine the extent of formula bias,
the official index which uses given year weights was recalculated
from the indexes for individual commodity groups given in source 22 ,
using 1940 weights. Little formula bias was found by this method,
its absence being attributable to the relatively small variation
among the price and quantity relatives during the period',.
Price reductions during 1940 and 1947-58 were achieved
by means of annual decrees listing the general categories of goods
for which prices were to be reduced and the percentage reduction in
price. Moscow embassy dispatches covering prices in state and coopera-
tive stores during the period appear to corroborate the claimed per-
centage reductions in prices. These percentage reductions also are
consistent with the official index, at least for 1948-52 An index
for this period, which was constructed by Janet Chapman using 1937
weights to combine the percentage reductions for individual commodi-
ties, agrees with the official index for this period.*
There is a possible conflict between embassy reporting
and the official index for 1956, but the evidence is insufficient to
prove the official index unreliable. In January 1956 the classification
system for most food products of animal origin on sale in state and
cooperative stores was simplified by reducing the number of different
classifications of products and prices. The net result of this simpli-
fication, the embassy staff believed, was to increase average meat
prices. 23/ Yet the official price index registered an increase of
less than 1 percent in food prices during 1956. In 1955, all meat and
* For discussion of the Chapman index, see c, p. 26, below.
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meat products accounted for 8.3 percent of total state and cooperative
food sales. Thus, on the basis of 1955 weights, a 12-percent increase
in meat prices would be required to raise all food prices by 1 percent.
Hence a fairly substantial increase in meat prices could have compara-
tively little effect on the index of food prices.
It is not clear how the Central Statistical Adminis-
tration in constructing the official price index for 1940 took account
of the change in mid-1940 in Soviet geographical boundaries which re-
sulted from the incorporation of the Baltic states. Recomputation of
the official index by dividing an index of total sales expressed in
current prices by the official index of sales volume for the years 1940
and 1950 agrees exactly with the official index. Yet in source 24 the
official index of sales volume is expressly stated to have been ad-
justed for the boundary change, whereas it is clear that the total value
of sales in current prices for 1940 excludes sales in the Baltic states
for most of the year. In view of the minor adjustment required in the
index, the error in the official index, if any, can be assumed to amount
to 2 percent or less.
Soviet literature on statistics of retail trade fails
to mention adjustments in the indexes of price or volume to take account
of changes in quality of products. Probably no such adjustments are
made. The index for 1940-50, by failing to take account of reductions
of quality during the period, may slightly understate the increase in
prices during the period. On the other hand, by failing to take account
of improvements in quality during 1950-58, which are likely to have
been significant in the case of some commodity groups, the official in-
dex probably tends to understate the decline in prices.
(c) Indexes for 1945-49
The indexes of state and cooperative prices for this
period appear to be the least reliable of any used in this research
aid. The index for 1945-47 and 1948-49 was derived by dividing data
on total sales (expressed in current prices) by the official index of
sales volume. Except for 1947-48, the official index of sales volume
was obtained by chaining annual percentage increases in sales reported
in the annual announcements of plan fulfillment, working backward from
1950. In the quantity index, no link for 1947-48 was reported in the
announcements of plan fulfillment but a price index for 1947 was re-
ported in source 25/. This index for 1947 is suspect, because it is
not certain that the index was constructed by the Central Statistical
Administration. The index for 1947 is used here, however, because it
agrees generally with estimates from other sources 26/ and because an
alternative estimate would be subject to about the same degree of error.
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The index for 1948 computed by this method is about
5 percent less than the official index reported explicitly for 1948
in source ?7/. It has not been possible to account for this discrep-
ancy. Because the derived index for 1948 is in closer agreement with
the Chapman index, it is used here in preference to the explicit index.
c. Revision of the Chapman Index
To obtain an independent check of the official index of
state and cooperative prices for 1928, 1937, and 1948, the Chapman in-
dex was revised. The original Chapman index of the prices of consumer
goods was constructed from prices charged in Moscow, which were obtained
mainly from official price handbooks. Government decrees and advertise-
ments in the press also were used to some extent. / A large amount
of attention was devoted to assuring comparability of products in deter-
mining price relatives for the sample which, for the 1928-37 comparison,
consisted of 88 commodities, including 34 foods and 54 nonfood goods.
The sample for the 1937-48 comparison consisted of 143 commodities,
including 65 foods and 78 nonfood goods.
In the original index the 1928 weights consisted of the
structure of expenditures by urban workers, and, for 1937 weights, ad-
justments to the 1936 structure of state and cooperative, retail sales
were used. The original Chapman index also was extended to 1952 on the
basis of 1937 weights by means of the annual Soviet price decrees. Al-
though the extension is only partially independent of the official in-
dex, it was not revised. Interestingly, the Chapman index for 1948-52
based on the price decrees agrees very closely with the official index.
Since the publication of the Chapman index, the Soviet
government has released much additional data on the structure of state
and cooperative retail sales for 1928, 1937, and 1950, which made it
possible for the author to reweight the original Chapman index. The
revised index used here makes use of the structure of 1928, 1937, and
1950 state and cooperative retail sales in deriving weights for 1928,
1937, and 1948, respectively. For constructing a deflator for retail
sales, the primary purpose here, the structure of retail sales is more
appropriate than the structure of expenditures of urban workers used
by Chapman for 1928 weights.
Comparison of the results of the revision with the original
Chapman index is presented in the following tabulation:
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1948
(1928 - loo) (1937 = loo)
Original Chapman index:
1928 weights
1937 weights
Revised Chapman index:
875
649
316
1928 weights
821
329
32
1937 weights
1948 weights
597
9
Comparison of the original and the revised Chapman indexes
indicates that, for the period 1928-37, use of the structure of state
and cooperative sales as 1928 weights in lieu of the structure of ex-
penditures of urban workers results in a smaller increase in prices,
suggesting that the index appropriate for deflating state and coopera-
tive sales understates considerably the increase in the cost living of
industrial workers during the period. Revision of the 1937 weights in-
creased the index for 1928-37 substantially but made little difference in
the index for 1937-48-
2. Index of Collective Farm Market Prices
a. Derivation
The index of Soviet collective farm market prices for the
years 1940 and 1950-58 was obtained from source 29/. For the years
1928, 1937, and 1948 this index was derived by working backward from
1955 on the basis of the index of state and cooperative food prices,
together with estimates of the relation of collective farm market
prices to state and cooperative food prices. The ratio of collective
farm market prices to state and cooperative food prices in 1955 was
estimated from source 30/. The ratios in 1937 and 1948 were obtained
by averaging ratios for individual products in Moscow, weighted by the
structure of state and cooperative sales. Data on state and coopera-
tive prices in Moscow were obtained from source 31 and data on col-
lective farm market prices in Moscow from source 22/. The ratio of
collective farm market prices to state and cooperative store food prices
in 1928, which is the arithmetic mean of computations based on both
state and cooperative weights and collective farm market weights, was
obtained from source 33/. The ratios of collective farm market prices
to state and cooperative food prices for the remaining years were derived
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by adjusting the ratio in 1955 by the relative movements of prices in
the two types of markets. The index of collective farm market prices
for 19+7 was obtained from source 34/.
The index for the earlier years is subject to a wide margin
of error because of two major defects: first, except for 1928, the
ratio of collective farm market prices to state and cooperative food
prices is based on prices in Moscow only and is weighted only by the
structure of state and cooperative food sales, and, second, the index
of state and cooperative food prices, as has been shown above, is sub-
ject to a fairly wide margin of error, particularly for 1928, when a
large amount of formula bias was present in the index.
The official index of collective farm market prices for the
years 1940, 1947, and 1950-58 is subject to the two types of errors
discussed under state and cooperative prices.** The underlying data
used by the USSR in calculating the official index of collective farm
market prices are markedly inferior to those used in calculating the
official index of state and cooperative prices.
The official index of collective farm market prices covers only
markets in important cities and excludes collective farm markets in
villages. Prices are recorded on the 25th day of each month in markets
in about 300 large cities throughout the USSR. The sample is comprised
of 26 commodity groups, including some 70 individual commodities.
Prices are recorded during the time of day and for the part of
the market where the largest volume of sales takes place. The average
monthly price for each commodity is obtained by computing a simple
average of the price recorded each month and the price recorded in the
preceding month. Quarterly and annual average prices, however, are
obtained by weighting by quantities sold in the respective time periods.
Data on quantity of products handled are recorded daily and, in
the case of sales by individual farmers, are estimated by subtracting
visual estimates of stocks remaining at the close of day from visual
estimates of quantities delivered to the markets each day. Complete
records of sales are available, however, for goods sold by the collec-
tive farms.
As in the case of the index of state and cooperative prices,
the index of collective farm market prices is constructed according to
* Material presented in this section is derived from source 35.
** See 1, b, p. 18, above.
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the Paasche formula with given year weights. The index is constructed
by calculating an index for each of the 26 principal commodity groups
in each major geographical area and then combining the 26 indexes on a
group basis both geographically and for the entire country.
Because of the limitation on its geographical coverage and the
crudity of much of its underlying data and because of the dispersion
of the direction and extent of price movements as between both commodi-
ties and geographic areas, the official index of collective farm market
prices is of dubious reliability.
Because adequate data on prices are available only for Moscow
and because the movement of collective farm market prices in Moscow is
not typical of that for the country as a whole, it has not been con-
sidered feasible to construct an independent index of collective farm
market prices as a check on the official index. Table )+* gives an
indication of the geographical spread of movements of collective farm
market prices in 1955-56.
3. Index of the Prices of Consumer Services
The index of prices of consumer services is based on a sample of
the prices of six principal consumer services. in Moscow for which
consumers pay cash and is an extension of the Chapman index computed
originally for the years 1928, 1937, 1948, and 1952. 36 The sample
includes housing (rent), utilities (water and electricity), transpor-
tation (streetcar and rail), communication (telephone and postage),
and recreation (cinema). The index of the prices of services presented
in Table 1** is weighted by the structure of consumer outlays on serv-
ices in 1955. An alternative index, weighted by the structure of con-
sumer outlays in 1923, is presented below.***
Before 19+8 the prices of most services except housing were sub-
ject to relatively little central control and varied somewhat from
locality to locality. 'However, the Council of Ministers, in a decree
of 9 August 1948, established uniform prices for most of the services
included in the index.
During 1928-48, there was a fairly wide dispersion in the movements
of prices of services. During the period the price of motion picture
tickets in Moscow increased 9 times, and the price of rail transport
increased more than 6 times, whereas the prices of household electricity
and water by 19+8 were 2 and 3 times, respectively, the prices of 1928.
*? P. 1 , above.
** P. 4, above.
*** P. 31, below.
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Because of the small sample used together with the dispersion both
geographically and through time in the prices of services, the index
of prices of services for the period 1928-48 is subject to a fairly
wide margin of error.
In most cases except electricity the new price set by, the decree
of 9 August 1948 was set equal to the average of existing prices. The
increase in the index between 1947 and 1948 reflects the increase in
the price of electricity effective in mid-1948. Since 1950, no price
changes for the principal consumer services have been announced, and
available data on prices of individual services fail to indicate sig-
nificant unannounced changes.
During 1928-58, there has been no change in the basic rates of
rent set by the All-Union rent law of 1926. 37 Under this law, rent
consists of two elements: first, the apartment tax, which is based
on actual facilities available in a given dwelling, and, second, an
additional charge, which is based on level of income for all persons
earning more than 145 rubles per month, with a legal maximum for the
two elements in most cases of 1.32 rubles per square meter per month.
Chapman estimates that the average rent paid in 1928 amounted to
0.26 rubles per square meter per month and that the corresponding
charge in 1937 amounted to 0.77 rubles. 38 By 1948, however, the
average monthly wage had risen well above that wage which would require
the occupant to pay the legal maximum rent (440 rubles per month). On
the assumption that the payments of those whose incomes remained low
enough to be charged less than the maximum rent are just offset by the
payments of those whose legal maximum is greater than 1.32 rubles per
square meter per month (such as handicraftsmen, teachers, and residents
of new houses and multistoried apartments in the large cities), the
average rent is estimated at 1.32 rubles per square meter per month for
1948. The average rent for 1948-58 is estimated to have remained un-
changed on the basis that the increase in payments above :L.32 rubles
per square meter per month has been offset by increases in categories
of the population, such as pensioners, paying less than 1.32 rubles per
square meter per month.
The index of rent does not take account of other outlays, such as
bribes paid to housing officials to obtain apartments and the cost of
maintenance and repair paid by tenants. These outlays probably reached
a maximum during 1928-48, when excess purchasing power was at a peak
and the stock of housing per capita was declining. Since 1950, how-
ever, the increase in the stock of housing per capita probably has
served to reduce the importance of these outlays. The effect of in-
cluding these outlays in the index, therefore, probably would be to raise
somewhat the increase in the index between 1928 and 1948 and to reduce
slightly the index between 1948 and 1958.
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The index of the prices of services does not take account of changes
in the quality of the services provided. During 1929-48, when the
quality of many services is likely to have declined, failure to take
account of quality probably causes the index to understate the increase
in the prices of services. Since 1948, however, the quality of some
services probably has increased somewhat. If proper account of quality
could be taken during this latter period, the index probably would show
a slight decline in the prices of services.
To determine the extent of formula bias in the index of the prices
of services, an alternative index was constructed with 1928 weights.
The alternative index shows a )+.4-fold increase in the prices of con-
sumer services during 1929-50, whereas the index with 1955 weights
shown in Table 1* shows a 3.5-fold increase.
4. Combined Index of All Consumer Prices
This section describes the method used to combine the indexes of
state and cooperative prices, collective farm market prices, and the
prices of consumer services into a single consumer price index.** The
objective is to combine these indexes on the basis of their relative
importance in household outlays for consumption purposes. Lack of data
has precluded removal from the three individual indexes of the effect
of changes in the prices of goods and services not purchased for house-
hold use.
a. Weights for 1955
Household outlays in 1955 rubles on goods for consumption pur-
poses, used for combining the indexes of state and cooperative prices
and collective farm market prices into a single index of consumer
goods prices,*** were obtained by subtracting purchases by institutions
and household purchases of building materials (defined as an element of
gross investment) from state and cooperative retail sales in 1955 and
by subtracting estimated purchases by institutions from collective farm
market sales. The weight of outlays on consumer services was obtained
from the ratio of estimated household outlays in 1955 on individual con-
sumer services to total outlays on goods for consumption purposes.
This computation is presented in the following tabulation 39/:
above.
See I, p. 3, above.
See Table 1, p. 4, above.
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Billion Rubles
Percent
Total household outlays for consumption
purposes:
543.6
State and cooperative retail sales,
1955:
501.9
Less purchases by state insti-
tutions (7.7 percent)
-38.6
Less purchases of building materials
-9.1
Total
454.2
83.6
Urban collective farm market sales:
47.8
Less purchases by state insti-
tutions
-2.4
Total
45.4
8.3
Household outlays on consumer services:
Housing
Utilities
Transportation
Communications
Recreation
Personal services
4.2
5.1
16.5
5.6
10.1
2.5
b. Weights for 1928 4o/
In estimating household outlays on goods and services in 1928,
total purchases of goods by institutions and household outlays on goods
for nonconsumption purposes were deducted from the total of state and
cooperatives sales and private sales:
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Billion Rubles
Percent
Total household outlays for
consumption
13.5
100.0
State and cooperative retail sales
11.8
Private sales
3.6
Less purchases by institutions and
household outlays for nonconsumption
purposes
-4.3
Total household outlays on goods
for consumption
11.1
82.2
Total household outlays on
consumer services
2.4
17.8
c. Results Using 1928 Weights
The combined index presented in Table 1* was constructed with
1955 weights. This index is compared with an alternative index con-
structed with 1928 weights in the following tabulation (1950 = 100):
Year
1955
Weights
1928
Weights
1928
8.0
7.9
1937
45
45
1948
135
140
1950
100
100
1955
78
83
1958
79
82
P. 4, above.
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The tabulation shows that it makes comparatively little dif-
ference to the combined index whether 1928 or 1955 weights are used.
In the index using 1928 weights, which gives greater weight to the in-
dex of collective farm market prices and the index of the prices of con-
sumer services than does the index using 1955 weights, the influence
of the large increase in collective farm market prices is offset by
the small increase in the prices of consumer services during 1928-50.
During 1950-58, however, the index using 1928 weights shows a somewhat
smaller decline in prices than does the index using 1955 weights be-
cause both the collective farm market index and the consumer service
index show smaller declines than does the state and cooperative index.
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GAPS IN INTELLIGENCE
Numerous small deficiencies in this research aid have resulted
from gaps in information. These gaps, of necessity, had to be filled
by approximations. The outstanding gap, however, is the lack of com-
prehensive official handbooks of consumer prices from which adequate
checks of the official index of state and cooperative retail prices
could be made for the period since World War II and from which the
index of the prices of consumer services could be greatly strengthened.
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SOURCE REFERENCES
Evaluations, following the classification entry and designated
"Eval.," have the following significance:
Source of Information
Doc. - Documentary
1
- Confirmed by other sources
A
- Completely reliable
2
- Probably true
B
- Usually reliable
3
- Possibly true
C
- Fairly reliable
4 - Doubtful
D
- Not usually reliable
5
- Probably false
E
F
- Not reliable
- Cannot be judged
6
- Cannot be judged
"Documentary" refers to original documents of foreign governments
and organizations; copies or translations of such documents by a staff
officer; or information extracted from such documents by a staff officer,
all of which may carry the field evaluation "Documentary."
Evaluations not otherwise designated are those appearing on the
cited document; those designated "RR" are by the author of this research
aid. No "RR" evaluation is given when the author agrees with the
evaluation on the cited document.
1. RAND Corporation. PJ419, Real Wages in the Soviet Union,
1928-52, by Janet Chapman, 17 Oct 53. U. Eval. RR 2.
2. Word, P.W. "US Statisticians Challenge Soviet Production
Figures," Baltimore Sun, 25 Jan 59. U. Eval. RR 2.
3. Holzman, F.D. Soviet Taxation, Cambridge, 1955, p. 112. U.
Eval. RR 2.
4. The New York Times, 1 Feb 59, p. E-5. U. Eval. RR 2.
5. CIA. CIA RR RA-30, Money Earnings in the USSR, 1928-60,
23 Apr 58, p. 2. OFF USE.
6. USSR, Tsentral'noye Statisticheskoye Upravleniye. Sovetskaya
torgovlya, statisticheskiy sbornik (Soviet Trade, Statistical
Handbook), Moscow, 1956, p. 33-35? U. Eval. Doc. (hereafter
referred to as USSR. Trade Statistical Handbook).
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25X1A
7. Vestnik statistiki, no 8, Aug 58, p. 81. U. Eval. Doc.
8. Sovetskaya torgovlya, no 1, Jan 58, p. 13-16. U. Eval. RR 2.
9. USSR. Tsentral noye Statisticheskoye Upravleniye. Narodnoye
khozyaystvo SSSR v 1958 godu (National Economy of the USSR in
1958), Moscow, 1959, P. 712,. 715, and 787. U. Eval. Doc.
(hereafter referred to as USSR. Yearbook)
10. Joint Committee on Slavic Studies. Current Digest of the Soviet
Press, vol 10, no 46, 24 Dec 58, p. 31-33. U. Eval. RR 2.
International Arts and Sciences Press. Problems of Economics,
vol 1, no 8, Dec 58, p. 13-17. U. Eval. RR 2.
11. USSR, Gosudarstvennoye Izdatel'stvo Politicheskoy Literatury.
Ekonomika sovetskoy torgovli (Economics of Soviet Trade),
Moscow, 1958, p. 258-264. Ti. Eval. RR 2.
12. USSR. Yearbook (9, above), p. 707. U. Eval. Doc.
13. CIA. CIA /RR 150, Outlays on Consumer Services in the USSR,
1948-60, Nov 58. U.
14. Vestnik statistiki, no 3, Mar 57, p. 94. U. Eval. RR 2.
15. USSR, Tsentral'noye Statisticheskoye Upravleniye. Narodnoye
khozyaystvo SSSR v 1956 godu (National Economy of the USSR
in 195 , Moscow, 1957, p. 237. U. Eval. Doc.
USSR. Yearbook (9, above), p. 770. U. Eval. Doc.
16. USSR. Trade Statistical Handbook (6, above), :p., 20. U.
Eval. C.
Vestnik statistiki, no 8, Aug 58, p. 81. U. Eval. Doc.
17. Sovetskaya torgovlya, no 11, Nov 57, P? 59. U. Eval. Doc.
18. Sotsialisticheskiy trud, no 5, May 59, P. 51. U. Eval. Doc.
19. USSR. Trade Statistical Handbook (6, above), p. 132. U.
Eval. Doc.
20. Sotsialisticheskiy trud, no 5, May 59, P? 51. U. Eval. Doc.
21. Ryauzov, N.N., and Titel' baum, N.P. Statistika sovetskoy
torgovli (Statistics of Soviet Trade , Moscow, 1956, p. 151-159.
U. Eval. Doc.
Katal'nikov, I.F. Statistika sovetskoy torgovli (Statistics
of Soviet Trade), Moscow, 1957, p? -73. U. Eval. Doc.
Plan, no 4, 25 Feb 37, p. 44-47. U. Eval. Doc.
22. USSR. Trade Statistical Handbook (6, above), p. 131. U.
Eval. Doc.
23.
24. USSR. Trade Statistical Handbook (6, above), p. 12. U.
Eval. Doc.
25. Sotsialisticheskiy trud, no 5, may 59, p. 57. U. Eval. Doc.
26. Wiles, P.J.D. "Retail Trade, Retail Prices, and. Real Wages
in USSR," Bulletin of the Oxford University Institute of
Statistics, vol 171 no 11, Nov 54. U. Eval. RR 2.
Ibid., Vol16, no 12, Dec 54. U. Eval. RR 2.
27. USSR. Trade Statistical Handbook (6, above), p. 132. U.
Eval. Doc.
28. RAND Corporation. P-449 (1, above).
29. USSR. Trade Statistical Handbook (6, above), p. 182. U.
Eval. Doc.
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USSR. Yearbook (9, above), p. 787. U. Eval. Doc.
30. USSR. Trade Statistical Handbook (6, above), p. 133, 134.
U. Eval. Doc.
31. RAND Corporation. P-449 (1, above).
32. Kerblay, A. Official Moscow Collective Farm Market Prices
(unpublished). OFF USE. Eval. Doc.
33. RAND Corporation. P-449 (1, above).
34. Sotsialisticheskiy trud, no 5, May 59, p? 51. U. Eval. Doc.
35. Ryauzov and Titel'baum, op. cit. (21, above).
Katal'nikov, op. cit. (21, above).
Plan, no 4, 255 Feb 37, p. 44-47. U. Eval. Doc.
Whitman, J.T. "The Kolkhoz Market," Soviet Studies, vol 7,
no 4, Apr 56, p. 384. U. Eval. RR 1.
36. RAND Corporation. P-449 (1, above).
37. Sosnovy, T. "Rent in the USSR," The American Slavic and East
European Review, vol XVIII, no 2., Apr 59, p. 17 4. U.
Eval. RR 2.
38. RAND Corporation. P-449 (1, above).
39. CIA. CIA/RR RA 150 (13, above).
USSR. Trade Statistical handbook (6, above), passim. U. Eval. Doc.
40. Hoeffding, 0. Soviet National Income and Product n 1928,
New York, 1954, p. 115. U. Eval. Doc.
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