The Second Economy and the Destabilizing Effect of its Growth on the State Economy in the Soviet Union, 1965-1989

Duke Economics Working Paper #95-33

90 Pages Posted: 27 Apr 1997

See all articles by Vladimir G. Treml

Vladimir G. Treml

Duke University

Michael Alexeev

Indiana University Bloomington - Department of Economics; Russian Presidential Academy of National Economy and Public Administration

Abstract

The authors suggest that the rapid growth of the illegal underground economy in 1970s and 1980s has destabilized the Soviet state economy and weakened the mechanism of central planning. This hypothesis is advanced on the basis of the examination of striking decline in income (legal) elasticities of demand for a number of consumer goods purchased in state retail trade in Russia and Ukraine. The growth of income from illegal sources and purchases of consumer goods in black markets explains this phenomenon.

JEL Classification: P21, P27, P39

Suggested Citation

Treml, Vladimir G. and Alexeev, Michael V., The Second Economy and the Destabilizing Effect of its Growth on the State Economy in the Soviet Union, 1965-1989 . Duke Economics Working Paper #95-33. Available at SSRN: https://ssrn.com/abstract=15546 or http://dx.doi.org/10.2139/ssrn.15546

Vladimir G. Treml (Contact Author)

Duke University ( email )

Box 90097
320 Social Sciences
Durham, NC 27708-0097
United States
919-660-1800 (Phone)

Michael V. Alexeev

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall 105
Bloomington, IN 47405-6620
United States

Russian Presidential Academy of National Economy and Public Administration ( email )

pr. Vernadskogo, 84
Moscow, 119571
Russia

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