Conclusions
We started this paper from the widely accepted hypothesis that there is a significant price bias in socialist economies which undervalues investment as compared with market economies, but a comparison of the deviations of linear model prices (production prices, extended production prices, cost prices, and labour value prices) from actual prices in Austria and Hungary does not support this hypothesis:
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1)
The deviations of actual aggregated prices from linear model prices of both countries are very similar (r=0.85).
In both countries basic and food industries make profits which are smaller than average, while more dynamic industries with a higher share in new products obtain above average profits.
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2)
At production prices and extended production prices the relative price effect is stronger than the turnover tax effect and runs counter to it. Since this is the case in both countries it cannot be concluded that the share of investment in national income is distorted on the low side in Hungary.
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I wish to thank the Fonds zur Förderung wissenschaftlicher Forschung in Vienna for financial support, and among others O. Kýn, K. Laski, J. Richter, J. Skolka, and P. Wiedemann for helpful comments on earlier drafts of this paper. The responsibility for remaining errors is mine alone.
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Fink, G. Price distortions in the Austrian and in the Hungarian economy. Zeitschr. f. Nationalökonomie 41, 111–132 (1981). https://doi.org/10.1007/BF01283112
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DOI: https://doi.org/10.1007/BF01283112