The Behavior of the Soviet-Type Firm

Part of the International Studies in Economics and Econometrics book series (ISEE, volume 22)


We know from the three preceding chapters that the Soviet-type firm operates under the following conditions:
  1. a.

    The manager is the main link between the firm and the planning bureaucracy.

  2. b.

    The firm’s production plan specifies its output quota and the quantities of most variable inputs to be received by the firm, and it designates the suppliers of those inputs.

  3. c.

    The firm has a financial plan which is the monetary equivalent of its production plan. A bank supervises the use of budgeted funds, extends short-term credit when approved expenditures exceed planned receipts, and oversees the firm’s operations.

  4. d.

    The firm’s performance is evaluated on the basis of the achievement of the gross output target and the realization of the average planned costs and profits.

  5. e.

    The firm hires labor services in the market, but the production plan determines the size of the firm’s wage fund. Also, the relative wages for different skills are set administratively.

  6. f.

    The government allocates new capital goods to enterprises and transfers existing ones from one enterprise to another. The firm pays no rent on capital goods in its possession; however, it cannot sell them, rent them, or change their quality. Thus, the firm bears no cost for having “too much capital.



Production Function Capital Good Production Quota Monetary Equivalent Opportunity Choice 
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Suggested Readings

  1. Furubotn, E. and Pejovich, S. The Economics of Property Rights, Cambridge: Ballinger, 1974, Chapter 14.Google Scholar
  2. Schroeder, G. “The Implementation and Interpretation of Innovations in Soviet-Type Economies,” The Cato Journal, 9, 1989.Google Scholar
  3. Winiecki, J. The Distorted World of Soviet-Type Economies, Pittsburgh: University of Pittsburgh Press, 1988.Google Scholar

Copyright information

© Kluwer Academic Publishers 1990

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