Soviet Economic Growth through the Interstate Prism: the Role of Research Funding

Abstract

The article estimates economic growth factors in the late USSR: research and development (R&D) expenditures along with physical and human capital accumulation as well as institutional and technological dynamics. The USSR results are compared with those of a sample of reference countries with the use of collected statistical data and estimates in the literature and data sets. Developing theoretical ideas by Romer (1990) the authors test a model of the production function which includes R&D expenditures as a source of endogenous growth. To indirectly characterize institutional and general technological dynamics they choose the relevant proxy indicators. The use of these variables within the modified production function is the principal methodological contribution of this research related to the analysis of historical variations of industrial economy development. The model mostly fits Japanese data and somewhat less data on other industrialized countries. The main USSR variables are statistically significant for the period of 1955-1990, but not for the period of 1965-1990. The research findings support the hypothesis that in the mid 1950s – early 1960s Soviet economy had certain prerequisites for transition to endogenous growth model based on R&D and technologies which turned out mostly unrealized. The authors have not found enough evidence to confirm the hypothesis of a decisive role of institutional factors influencing the slowdown growth in the USSR.