The optimal rate of industrialization in developed and developing centrally-planned economies: A general equilibrium approach

The investment policies of Czechoslovakia and Romania are examined by means of counterfactual experiments employing econometric models of these countries. Alternative investment policies considered are: (1) an increase in aggregate investment with unchanged sectoral distribution; (2) a shift in investment from other sectors to manufacturing; and (3) a shift in investment from manufacturing to services. For Czechoslovakia policy (2) is deemed superior to the historical pattern of investment and to the other two hypothetical policies, while for Romania policy (3) is best. The general equilibrium evaluation of development policies shows the conflicts among planners' goals in setting investment policy and the effect of external constraints, such as the availability of food and raw material imports, on planners' ability to implement desirable strategies.