By Jan Adam
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Additional info for Wage Control and Inflation in the Soviet Bloc Countries
1. The growth of average wages in the economy as a whole can be related to productivity growth on the same scale. It is known that 33 34 Wage Control and Inflation in the Soviet Bloc growth of average wages at the same rate as productivity is not inflationary! e. it does not produce shortages of goods), provided all other factors remain the same. It is clear that if average non-wage incomes grow faster than average wages and, consequently, average incomes 2 grow faster than productivity, inflationary pressures will occur.
One is that only some food items are sold on the collective farm market. Secondly, part of the higher prices is due to the higher quality and the freshness of the food available at that market. 51 Usually, increases in savings are also mentioned as a sign of repressed inflation. In our opinion what may be indicative of repressed inflation is not simply a growth in savings at the same rate but an Price Stability Policies in the Soviet Bloc 19 increase at a higher rate. But even higher rates can be partly due to new stimuli for voluntary savings.
The administration of rationing is expensive, but what is worse, it hinders the promotion of economic efficiency by undercutting incentives to higher productivity. The money equivalents of rationed goods-due to their relative cheapness--can be earned without great effort. The higher the rations and the bigger the difference between rationed and commercial prices, the smaller the incentive to work hard since increments in earnings can be turned into more consumer goods only on the very expensive commercial market.
Wage Control and Inflation in the Soviet Bloc Countries by Jan Adam