Money in a centrally planned economy differs in fundamental respects from money in a market economy. Whereas command of purchasing power (money) is virtually synonymous with the power to acquire goods and services or other assests in a capitalist economy, money matters much less in a socialist economy characterized by pervasive shortage and non-market processes of allocation and distribution. Instead of the familiar household budget constraint from microeconomic theory of market systems, consumer choice under socialism is typically limited by a budget constraint as well as a host of quantity constraints. Furthermore, non-monetary benefits associated with a job or political position (e.g. connections or privilege) can constitute a very significant addition to a household's real income. Exploration of these differences in the nature of household constraints and of sources of non-market income and wealth in socialist economies is the central concern of the proposed research. The specific purpose of the project is to derive estimates of the ruble value of certain privileges in the USSR. The distribution of economic welfare (real income) in the Soviet Union, as well as in other countries where markets play a secondary role in resource allocation and the distribution of income, is known to depend heavily upon the distribution of such non-monetary forms of wealth. The ultimate purpose of such estimates is for adjusting conventional measures of the distribution of monetary income to reflect the distribution of real income. The data to be used on the project come from the General Survey of the Soviet Interview Project (SIP). The particular privileges for which information is available are 1) access to closed shops or special rations, 2) use of an official car, and 3) access to closed medical clinics. Preliminary analysis by the principal investigator has found that an ordered probit model using the SIP respondent's assessment of own relative material well-being together with income and privilege variables generates plausible estimates for the ruble value of these privileges. The major extension of that work planned in this project will be to incorporate measures of human capital and other household wealth into the specification and estimation of the model.
