Richard Portes, David Winter; Disequilibrium Estimates for Consumption Goods Markets in Centrally Planned Economies, The Review of Economic Studies, Volume 47,

HIS article gives estimates of household demand for money and savings functions for four centrally planned economies (CPEs). The data are post-war annual time series for Czechoslovakia, the GDR, Hungary, and Poland. The estimation of these functions characterizing the demand side of the consumption goods market is a part of the empirical component of our research into macroeconomic equilibrium in CPEs. The supply side of the consumption goods market is analysed in a separate paper (Portes and Winter, 1977), and we are currently carrying out disequilibrium estimation (Goldfeld and Quandt, 1975) in a model using the demand and supply function specifications developed in these papers. It is conventional wisdom that since the early 1950s, the CPEs have suffered chronically from some significant degree of excess demand (repressed inflation), i.e., that buyers have faced quantity constraints (informal or formal rationing) on the markets for goods and labour (e.g., Bush, 1973; Garvy, 1975; Schroeder, 1975). When authors think it necessary to give empirical justification, this is in the form of reference to queues, shortages, hidden price increases, quality deterioration, excess liquidity and forced saving, and some data on prices in the small free market sectors of these

This paper specifies and estimates a four-equation disequilibrium model of the consumption goods market in a centrally planned economy (CPE).The data are from Poland for the period 1955-1980, but the analysis is more general and will be applied to other CPEs as soon as the appropriate data sets are complete.This work is based on previous papers of Portes and Winter (P-W) and Charemza and Quandt (C-Q).P-W applied to each of four CPEs a discrete-switching disequilibrium model with a household demand equation for consumption goods, a planners' supply equation, and a "mm" condition stating that the observed quantity transacted is the lesser of the quantities demanded and supplied.C-Q considered how an equation for the adjustment of planned quantities could be integrated into a CPE model with fixed prices and without the usual price adjustment equation.They made plan formation endogenous and permitted the resulting plan variables to enter the equations determining demand and supply.This paper implements the C-Q proposal in the P-W context.It uses a unique new data set of time series for plans for the major macroeconomic variables in Poland and other CPEs.The overall framework is applicable to any large organization which plans economic variables.