Effective Purchasing Power in a Quantity Constrained Economy: An Estimate for the German Democratic Republic
A measure of microeconomic disequilibrium for households facing both budget and quantity constraints is estimated from East data. Using a new specification, the Flexible-Cobb-Douglas utility function, the parameters of a German direct utility function are estimated from West family budgets. It is estimated that an average East family in 1977 would have been willing to give up 13% of its total expenditure in order to attain its demands at official prices.