Publisher:
Yale University, Economic Growth Center, New Haven, CT
Abstract:
This paper studies the validity of the Preobrazhensky's First Proposition, P1, for the centrally planned Poland during the period of 1960-1987 by testing whether the state increased its internal accumulation, investible surplus, by reducing the inter-sectoral terms of trade between agriculture and industry. It uses an alternative bivariate approach with pair-wise cointegration and Granger causality analysis. While finding some support for P1 in Poland, it reveals that the existing multivariate empirical approach derived from the Sah-Stiglitz's market-based theoretical model of the "price scissors" problem can misrepresent not only the validity of P1 in a centrally planned economy but also the impact of the intrinsic determinants of the state's investible surplus such as the production capacities in agriculture and industry.