Utilization of fixed capital and Soviet industrial growth

Growth rates of output and factor productivity in Soviet industry fluctuate around a long-term downward trend. These fluctuations can be partially explained by fluctuations in the growth of services of capital. The capacity utilization rate is taken as a proxy for the extent of utilization of capital stock. Variations in the capacity utilization rate explain a significant part of the changes in the rate of growth of total factor productivity between 1970–1983. Declines in the capacity utilization rate are caused by errors in the allocation of investment, which create an imbalance of capacities between raw-materials and manufacturing sectors.