The Price of Nationalism: Evidence from the Soviet Union

The Price of Nationalism: Evidence from the Soviet UnionAuthor(s): D. Andrew AustinSource: Public Choice, Vol. 87, No. 1/2 (Apr., 1996), pp. 1-18Published by: SpringerStable URL: http://www.jstor.org/stable/30027357 .

Accessed: 15/06/2014 03:20

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact [email protected].

.

Springer is collaborating with JSTOR to digitize, preserve and extend access to Public Choice.

http://www.jstor.org

This content downloaded from 91.229.248.187 on Sun, 15 Jun 2014 03:20:32 AMAll use subject to JSTOR Terms and Conditions

http://www.jstor.org/action/showPublisher?publisherCode=springer

http://www.jstor.org/stable/30027357?origin=JSTOR-pdf

http://www.jstor.org/page/info/about/policies/terms.jsp


Public Choice 87: 1-18, 1996. © 1996 Kluwer Academic Publishers. Printed in the Netherlands.

The price of nationalism: Evidence from the Soviet Union*

D. ANDREW AUSTIN Department of Economics, University of Houston, Houston, TX 77204-5882, U.S.A.

Accepted 28 April 1994

Abstract. This paper investigates the effect of implicit subsidies from the Russian Republic to other republics within the former Soviet Union on voting behavior in the All-Union Referendum of March 1991. These subsidies comprised the difference between interrepublic trade balances at domestic and world prices. A model of voting behavior incorporating effects of ethnic composition and subsidies on voting yields the estimating equation. Regression results suggest voters are influenced more by economics (subsidies) than by politics (ethnicity), although ethnicity was an important determinant of republican cooperation with Soviet authorities. Analysis of estimation results suggests the level of implicit subsidies required to increase support for the Soviet regime from 60% to 750% would have equaled 10% of the Russian republic's GDP.

1. Introduction

The demise of the Soviet Union has been explained by the emergence of nationalism and its inability to provide a satisfactory level of material well-being. Having failed to create a "New Soviet Man" immune to nationalism or to provide a standard of living comparable to advanced capitalist societies, the Soviet regime collapsed. These explanations assume Soviet leaders, no longer willing to suppress national movements with massive force and unable to spur economic growth, wished to preserve the union but did not have the means to do so. However, these leaders may have had means to preserve the Soviet Union, but chose not to, because the price of containing nationalist movements was too high.

This paper analyzes the relationship between nationalism and economic factors by examining voting behavior in the March 1991 referendum on the preservation of the USSR. Data from the 1991 referendum suggest both nationalism and living standards affect voting behavior. This provides the central govern-

* I am grateful to Steve Craig and Bud Collier for useful suggestions, to Boris Milner, Victor Polterovich and Ward Kingkade who supplied economic and demographic data, and to the Univer- sity of Houston for research support. An earlier version was presented at the Conference on Alter- native Models of Economic Reform, at George Washington University in October 1991. Remain- ing errors are mine.



2

ment an opportunity to offset voters' "taste" for nationalism by changing the level and distribution of economic transfers. The central government therefore faces a "price" of nationalism, which it must pay in order to maintain voters' approval for a unified state. In other words, the center exchanges subsidies for support of the regime.

Marrese and Vanous (1983) argue the USSR provided implicit subsidies to COMECON countries during the 1970s by declining to raise prices of exported raw materials when world market prices rose. In exchange for these implicit subsidies, according to Marrese and Vanous, the USSR received noneconomic benefits such as greater ideological cohesion and enhanced legitimacy among its allies, and facilitated the placement of military bases in Eastern Europe.

This paper differs from Marrese and Vanous because analysis of voting data from referenda provides a direct test of the hypothesis that trade subsidies and political support are linked. The empirical results show the transfer of economic resources to non-Russian republics is correlated with the level of political support, as demonstrated by the proportion of votes for preservation of the Soviet Union. This suggests Russian leaders had the opportunity to use economic policy to bolster their political objectives. If Russian leaders had a "taste" for empire, this may have allowed them to trade lower levels of consumption within the Russia for higher levels of support for the preservation of the USSR. This represented a willingness to pay for the reduction of nationalism, through transfers or subsidies to non-Russian republics.

This study examines the effects of subsidies independently of other instru- ments which may have been used to preserve the USSR.1 This is justified by two separate rationales. First, a rational emperor who possesses multiple in- struments to maintain control over territory will weigh the costs and benefits of using each instrument. A policy which maximizes the emperor's net benefits must equalize marginal benefits and marginal costs for each available instrument which is used, unless one instrument is superior to all others. Therefore, evidence showing positive net marginal benefits to the use of subsidies is perfectly consistent with the existence of positive net marginal benefits to threats of force, and indeed, is predicted by basic economic theory. Second the effica- cy of implicit subsidies depends on the marginal response by voters in non- Russian republics. There is no reason to expect the average level of military threats to suppress any marginal response by voters. The presence of significant marginal responses to subsidies is an empirical issue, which is resolved below.

This paper employs a model of an individual voter's maximizing behavior to derive an estimating equation describing voter response to trade subsidies. This permits recovery of the utility function parameters of a representative voter, and allows computation of required levels of compensation. This compensation estimate provides an analytic measure of the "price" of nationalism.



3

A central government interested in preserving a unified government and preventing secession by lower level governments (republics) may be able to increase its support in a republic by providing additional transfers to that republic. The minimum transfer required to secure approval of the unified government will depend on the initial level of support and voters' willingness to substitute consumption for their "taste" for nationalism. Using the estimated marginal rate of substitution the paper provides calculations of the minimum transfer needed to secure majority support in each non-Russian republic.2

The size of the transfers needed to preserve the USSR would have been large. In the republics analyzed here, nearly 60%o of the voting age population voted to preserve the USSR. While this is more than a majority, it was clearly an in- sufficient level of support given the subsequent collapse of the USSR. To obtain a 75% level of approval for preservation of the Soviet Union in all republics, transfers to non-Russian republics would have had to reach about 6% of the USSR's total net material product or nearly 10% of the Russian republic's net material product, representing a transfer of 55 billion rubles from Russia to other republics. The magnitude of these figures suggests that the price of nationalism is high, and the Russian Republic was unwilling to pay this price.

2. The All-Union Referendum of March 19913

2.1. Background

Faced with growing secessionist activity in all Soviet republics, Mikhail Gor- bachev in December 1990 proposed a referendum on the preservation of the Soviet Union. Through this referendum Gorbachev hoped to receive a mandate to negotiate a new Union treaty, and guarantee the continued primacy of the Soviet government. This referendum provided the first direct measure of nationalist sentiment across the Soviet Union.

The All-Union Referendum was held on 17 March 1991. Seventy six percent (76%) of the ballots were voted "Yes", accounting for 58% of eligible voters. Six republics (Armenia, Estonia, Georgia, Lithuania, Latvia and Moldavia) refused to establish central commissions to administer the referendum, although Soviet authorities did set up some polling places in those republics. In these republics voting participation was substantially lower than in other republics.4

2.2. Eligibility, participation and voting

A voter's decision to vote "Yes" can be decomposed into three separate decisions: whether to become eligible to vote, whether to participate in voting (con-



4

ditional on becoming eligible), and whether to cast a "Yes" vote (conditional on participating).

A voter was eligible if her name appeared on a voting list compiled by republican authorities. There is a wide variation in the proportion of the population on the voting lists among republics. In some Central Asian republics the num- bers on the voting lists nearly equaled the total adult population, while in republics which did not establish voting commissions only a fraction of the adult population was on the lists.

The participation decision potentially depends on the personal opportunity costs of voting and the perceived magnitude of the difference between the alter- natives. The personal opportunity costs for a Soviet voter may have differed from those of Western voters for two reasons. First, the lack of electoral commissions in some republics raised the costs for voters in those republics. Second, anti-Soviet voters may have derived "psychic" benefits from refusing to vote, and pro-Soviet voters may derive "psychic" benefits from voting because participation in the referendum may convey legitimacy to the regime in itself.

Many political groups in the non-Russian republics organized boycotts of the referendum, especially in the republics which did not establish central referendum commissions. The boycotts were explicitly motivated by the desire to avoid legitimizing the referendum, and therefore, the continuation of the Soviet Union. In these republics, non-participation was an overt political act.

The last decision, whether to vote "Yes", presumably depends on the voter's evaluation of the benefits of each proposal. A model of voter choice is deve- loped below.

While the voting decision can be subdivided into three sub-decisions, it may be true that it collapses into a single decision of whether to vote "Yes" or not. In other words, an invalid ballot, a vote against the referendum and failure to cast a ballot may represent equivalent events. As refusing to vote was one of the few forms of protest easily available to Soviet citizens failure to vote may be taken as an indication of dissatisfaction with central authority.5

3. A model of voting behavior

This section develops a simple model of voting used to analyze the results of the All-Union Referendum of March 1991 (see Table 1). Because voting data are only available at the republic level, the empirical work relies on analysis of aggregate voting behavior at the republic level.6

All individuals have identical utility functions defined over private consumption and a "taste" for nationalism. The utility function for i is increasing in both arguments, quasiconcave, and differentiable:



5

Table 1. Results of All-Union Referendum - 17 March 1991 (all figures in thousands)

Population Number of Number of Number of voting eligible voters voting age voters participating "Yes"

RSFSR 107,057.2 105,643 79,701 56,860 Ukraine 38,220.6 37,732 31,514 22,110 Belorussia 7,390.8 7,354 6,127 5,069 Estonia 1,149.8 300 222 211 Latvia 1,985.0 671 437 415 Lithuania 2,674.4 582 501 496 Moldavia 2,929.4 842 701 689 Georgia 3,726.8 45.7 44 44 Armenia 2,136.2 4.92 3.55 2.54 Azerbaijan 4,302.6 3,867 2,904 2,709 Kazakhstan 10,350.6 9,999 8,817 8,296 Turkmenistan 1,874.4 1,847 1,804 1,767 Uzbekistan 10,524.0 10,288 9,816 9,197 Tadzhikistan 2,591.4 2,549 2,408 2,316 Kirgizia 2,419.2 2,342 2,175 2,058

Source: Voting data from (Pravda, 1991); population data computed from (Vozrast, 1991).

Ui = U(Cj,Nij) (1)

where Cj is per capita consumption in republic j, Nij represents differences due to ethnicity. Individuals within a polity P are divided among two groups: natives and non-natives. The set of non-natives is R. The set P is partitioned into republics, denoted by the subscript j.

Referenda are held in each republic (except j = 1) on whether to remain in the same polity as j = 1 (a "Yes" vote), or not and secede from the polity (a "No" vote). If a majority of voters in republic j vote "No" then that republic secedes, and otherwise remains united to j = 1.7 If the republic remains united to j = 1, it receives a per capita subsidy sj, which is lost if secession occurs. Per capita consumption is the republic's average endowment and the subsidy:

Cj = oj + sj. (2)

If secession occurs, the subsidy received from the center is ended, and if no secession occurs, then the subsidy continues.

The preferences of individual i who resides in republic j towards secession depend on ethnicity as follows:8

N f = (1/2)In if (iER and no secession) or (ifR and secession) i i - (1/2)Dn if (ifR and no secession) or (iER and secession).



6

If individuals have affine utility functions then

Ui(Cj,Nij,Zij)= Oc(Cj) + Nij. (3)

An individual votes "Yes" if the utility from remaining in the union exceeds the utility from secession. A voter i decides "Yes" if

[Bc((Cj+Sj)-Cj)+(1/2)BN+(ZYES-ZNO)] ~- 0, iER (4a)

[Bc((Cj+Sj)-Cj)-(1/2)BN+(ZYES-ZNO)] 1 0, iiR (4b)

where ZYES and ZNO are unobserved variables in each outcome. Let

(ZyES_ZNo) = Z + ij, where sij- i.i.d. A(0,o) where A denotes the logistic distribution. Summing (4a) and (4b) over individual in each republic, the voting choice is characterized by

Pr(Vj) = A(Bo+Bc.Sj+BN.PRj)

(5)

where 0o = Z-(1/2)Pn. Equation (5) is estimated using a minimum logit x2 method. For illustration, let YES%j be the observed proportion of participants casting "Yes" ballots in republic j. Then

ln(YES%j1-YES%j) = Bo + Bc.sj + ON.pjR + uj (6)

where Var(uj) = [PARTj . (YES%) . (1 - YES%)]-1. The estimator incor- porates a correction for this heteroskedasticity.9

The comparative statics of the model are transparent. Higher subsidy levels and higher proportions of Russians lead to greater support for the referendum. This is supported by empirical results.

4. Data

This section describes data used to estimate equation (6). The key independent variables are a dummy variable representing whether a republic refused to establish an election commission (NOCOMM), subsidy per capita (SUBSIDPC)



7

Table 2. USSR Interrepublic trade, total population and ethnicity by republic

Trade Balance (1987) (Billions of Rubles)

Domestic World Population Percent Percent other prices prices (thousands) Russian nationality

RSFSR 3.6 28.5 148,041 82 18 Ukraine 1.6 -3.9 51,839 22 5 Belorussia 3.1 - 2.2 10,259 13 9 Estonia -0.2 - 1.1 1,583 30 8 Latvia -0.3 -1.4 2,687 34 14 Lithuania -0.4 -3.3 3,723 9 11 Moldavia 0.6 -1.5 4,362 13 23 Georgia 0.6 - 1.5 5,456 6 24 Armenia 0.6 -0.3 3,293 2 5 Azerbaijan 2.0 0.2 7,131 6 12 Kazakhstan -5.4 - 6.6 16,691 38 22 Turkmenistan -0.3 -0.3 3,622 9 19 Uzbekistan -3.9 -4.5 20,322 9 20 Tadzhikistan - 1.1 -1.4 5,248 8 30 Kirgizia -0.5 - 1.0 4,367 22 26

Sources: Trade balance data from (Mikhailov, 1990); population data from (Vozrast, 1991); nationality data from (Lapidus, 1990).

and the proportion of nonnatives in each republic (NONNAT). Table 2 provides trade balance, population and ethnicity data. Population data were taken from the January 1989 Soviet Census ("Vozvrast" 1991). The voting population is approximated by the number of persons at least 17 years old at the time of the census.10

The subsidy per capita is computed as the difference between the interrepublic trade balance at world prices and at domestic prices divided by republic population. This assumes trade balances are cleared among republics at domestic prices and world prices reflect the true value of resources. Mikhailov (1990) provides interrepublic trade data for 1987 computed by Goskomstat (State Committee on Statistics)."1

In 1987, the Russian republic's trade surplus at world prices was 28.5 billion rubles, but only 3.6 billion rubles at domestic prices. This difference represents a net transfer of resources from the Russian republic to other Soviet republics. Azerbaijan was the only other republic with a surplus at world prices. The trade balance at domestic prices exceeds the trade balance at world prices for all republics except Russia. Thus each non-Russian republic was the net recipient of resources from Russia.

The second specification splits the SUBSIDPC variable into TBALDOMP, the interrepublic trade balance at domestic prices per capita, and TBAL-



8

WORP, the interrepublic trade balance at world prices per capita. As noted above, a reduction in TBALWORP ceteris paribus implies a republic gains resources from Russia. An increase in TBALDOMP implies a concomitant increase in ruble balances if trade balances are cleared, but within a centrally planned economy there may be little correlation between the true resource value of exports and imports. Therefore, the model predicts higher trade deficits at world prices implies higher subsidy levels, and hence higher levels of support. The effects of trade deficits at domestic prices are less clear.

A resident is considered a non-native if her ethnicity differs from that republic's predominant ethnic group. Data on nationalities in each republic were taken from Lapidus (1989).

5. Estimation and results

This section describes regression results and estimates of the level of additional subsidies which would have been required to preserve the USSR. Estimates are provided for each sub-decisions: eligibility, participation and voting. Each decision variable is regressed against three sets of independent variables. The first set comprises NOCOMM, NONNAT, SUBSIDPC, and a constant term. The second set comprises NOCOMM, NONNAT, TBALDOMP, TBALWORP and a constant. The third set comprises NONNAT, TBALDOMP, TBAL- WORP, NONNAT*SUBSIDPC and a constant.

5. 1. Eligibility, participation and voting regression results

Regressions were estimated for non-Russian republics using independent variables described above. The dependent variables are the log odds ratios of (1) the proportion on voting lists, (2) the proportion of those eligible who participated, and (3) the proportion of participants casting ballots for preservation of the USSR.

Table 3A presents data for three sets of independent variables for the eligibility decision. The existence of an electoral commission was the main determinant of eligibility, as the constant term and NOCOMM are the only significant coefficients. As expected, lack of an electoral commission reduced the proportion of eligible voters.

Table 3B presents results on the participation decision conditional on eligibility. In the first specification no coefficient except for the constant term is significant. In the other two specifications, the NONNAT coefficient has a negative sign, suggesting higher participation in more ethnically homogeneous republics, and the TBALWORP coefficient is negative and significant, im-



9

Table 3A. Regression results; minimum logit X2 method; eligibility equations

Dependent log (ELIG/VOTPOP1-(ELIC/VOTPOP)) variable

Weighting [VOTPOP* (ELIGVOTPOP)*(1-ELIGVOTPOP)]

1/2

variable

Specification (1) (2) (3)

Constant 3.32* 3.80** 4.79** (3.10) (2.90) (2.46)

NOCOMM - 4.226* - 3.99* (-3.73) (-3.26)

NONNAT .895 -0.44 - 1.02 (.38) (-.14) (- .181)

SUBSIDPC - .000848

(-.354) TBALDOMP - .00257 - .00515

(-0.724) (- .856) TBALWORP .00135 .00421

(0.518) (1.02) SUBSIDPC*NONNAT - .0170

(-1.29) R2 .9251 .9288 .8691

RI .8951 .8892 .7963 Mean sq. error .9731 1.002 1.356 F 30.87 23.47 11.95

[4,10] [5,9] [5,9]

t-statistics are in parentheses. * Coefficient significant at the .01 level. ** Coefficient significant at the .05 level. ***Coefficient significant at the .10 level.

plying larger net transfers of resources from Russia lead to higher participation.

Table 3C reports results for the three specifications used above, along with two other specifications which analyze the voting decision conditional on participation. In the first specification the NONNAT coefficient is significant and both NONNAT and SUBSIDPC coefficients have expected positive signs.

In other specifications the variable SUBSIDPC is split into TBALDOMP and TBALWORP.12 In both specifications (2) and (3) the coefficient for TBALDOMP is negative, though smaller than the coefficient for TBAL- WORP. This holds for the effect of TBALDOMP conditional on the level of TBALWORP as in specification (2), or for the unconditional effect, as in specification (3). As noted above, the definition of SUBSIDPC assumes inter-



10

Table 3B. Regression results; minimum logit x2 method; participation equations

Dependent log (PARTICIPATION/ELIG1-(PARTICIPATION/ELIG)) variable

Weighting [

ELIG* (PARTICIPATIONELIG)*(1-PARTICIPATION) ]

1/2

variable


Constant 1.38* 3.19* 2.86* (4.20) (11.18) (7.95)

NOCOMM -.398 - 1.70**

(- .20) (- 2.04) NONNAT 1.21 - .655* - .0490**

(1.25) (-5.70) (-3.20) SUBSIDPC - .0045

(- .50) TBALDOMP - .00346* - .00012

(-6.23) (-.046) TBALWORP - .00417* - .00719**

(-5.63) (-2.79) SUBSIDPC*NONNAT - .0157

(-1.40) R2 .9842 .9977 .9972 R2 .9779 .9963 .9956 Mean sq. error .5336 .2163 .2373 F 155.61 765.15 635.85

[4,10] [5,9] [5,9]


republic trade balances in rubles are cleared. If true (or perceived by voters to be true), the coefficient on TBALWORP will be negative, the coefficient on TBALDOMP will be positive and both will be of equal magnitude. This restric- tion is tested by comparing specifications (1) and (2) using a t-statistic, and is rejected at the .01 level. This suggests trade balances in rubles are not cleared, or that the value of imported goods obtained in the future with the proceeds of net interrepublic exports is less than the value of goods exported.

In specifications (2) and (4) the negative and significant coefficient on TBALWORP implies net transfers of resources from Russia led to higher levels of political support for the USSR, as predicted.

Specification (5) includes an interaction term TBALWORP*NONNAT. This specification is used because inspection of specifications (3) and (4) sug-



11

Table 3C. Regression results; minimum logit x2 method; voting equations

Dependent log (YESVOTE/PARTICIPATION1-(YESVOTE/PARTICIPATION)) variable

Weighting [PARTICIPATION* (YESVOTE/PARTICIPATION)* (1-YESVOTE/PARTICIPATION)]1/2 variable

Specification (1) (2) (3) (4) (5)

Constant - 0.87 1.71** .016 .692 6.02**

(-1.25) (2.86) (.017) (1.59) (2.39) NOCOMM 1.28 -0.56

(.13) (-0.11) NONNAT 5.99** - 0.52** .035 - .015 - .209**

(2.69) (- 2.19) (1.05) (- .80) (- 2.27) SUBSIDPC .00159

(.99) TBALDOMP - .0025*** - .00146 - .00372**

(- 2.23) (- .69) (-3.11) TBALWORP - .00848* - .0079* .00242

(-5.55) (-4.67) (0.38) TBALWORP*NONNAT - .0384

(-1.75) R2 .9080 .9781 .9028 .9660 .9836 R2 .8711 .9659 .8763 .9568 .9746 Mean sq. error .8965 .4650 .8864 .5240 .4019 F 24.66 80.42 34.04 104.27 108.26

[4,10] [5,9] [3,11] [3,11] [5,9]


gests a possible correlation between TBALWORP and NONNAT. The negative sign on this interaction term implies subsidies generate smaller increases in political support in republics with large native populations. In other words, republics containing fewer Russians and other nonnative residents have a higher "price" of nationalism in that a larger subsidy would be required to effect a given change in voting behavior compared to republics with large nonnative populations. To summarize, these results suggest that resource allocation decisions had important effects on voting behavior, but that ethnicity had a weaker direct effect than might have been expected.



12

5.2. The electoral commission decision

The decision not to establish an electoral commission was of course a political decision made by republican officials, and was presumably influenced by the same factors affecting voters' decision whether to support the Soviet regime. While the existence of a commission is an exogenous variable for an individual voter at the time of the referendum, variables reflecting nationalism or economic well-being may have influenced voting through indirectly NOCOMM as well as directly.

A probit estimation was conducted for the decision not to establish an electoral commission. Presumably individual leaders or committees within each republics made those decisions, and so data are unweighted. These results are presented in Table 4. This probit, with RHS variables TBALCONS (interrepublic trade balance for consumer goods) and NONNAT correctly predicts the decisions of all 14 republics.'3 Specifications using SUBSIDPC or TBAL- DOMP and TBALWORP do less well. Why republic leaders would be more sensitive to the trade balance in consumer goods than to broader trade balance indicators is unclear.14 While ethnicity does not appear to have played an important role in the decisions of voters, it strongly influenced the decision to cooperate in the administration of the referendum.

Table 4. Regression results; probit estimates; decision not to establish electoral commissions

Dependent NOCOMM variable


Constant - 65.3* - 2.13 -5.68 (.) (1.50) (0.0)

TBALCONS - 7.42*

(.) SUBSIDPC .00623**

(2.31) TBALDOMP - .0874

(- .008) TBALWORP - .842

(0.013) NONNAT - 229.7* .075 - 701.5*

(.) (.02) (.) X2 19.12 9.30 19.12 [Degrees of [2] [2] [3]

freedom]

t-statistics are in parentheses, where defined. * Coefficient significant at the .01 level. **Coefficient significant at the .05 level.



13

5.3. Evidence from the Latvian referendum15

Because trade data are only available at the republic level, the analysis presented above uses interrepublic variation to identify the influence of trade subsidies and ethnic composition on voting behavior. In this section data from the Latvi- an secession referendum are used to identify the influence of ethnicity on voting behavior using intrarepublic variation. While the interrepublic analysis provides mixed answers on the effect of ethnicity on voting behavior, the Latvi- an data strongly supports the theoretical model.

On 3 March 1991 the Latvian Supreme Council conducted a referendum on secession from the USSR.16 The turnout rate was 88%, and almost three fourths of voters favored the proportion, implying nearly two thirds of the adult population favored secession. Since only 51 %/o of the permanent residents of Latvia are ethnic Latvians, a substantial number of Russian or other non- Latvian voters favored secession. Voting results and the percentage of ethnic Latvians are available for each of seven cities and 26 rural districts, allowing an analysis of ethnicity's effect on secession preferences. Unfortunately, no disaggregated economic data are available.

The proportion of "No" votes is regressed on the percentage of Latvian voters and a dummy variable for cities using OLS and the minimum logit X2 method.17 The results in Table 5 show the percentage of Latvian voters is strongly correlated with support for secession. The OLS regression shows the addition of 100 Latvian voters is associated with an increase of 73 votes for secession. However, the hypothesis that support for secession increases at a one-to-one rate with the percentage of Latvians can be rejected.'8

These results confirm the importance of nationalism. A larger native population implies greater support for secession, as predicted by the model. However, that the percentage of native Latvians is not perfectly correlated with the percentage of votes for secession strongly suggests other factors play an important role.

5.4. Compensation analysis

The existence of a relationship between indirect subsidies and political support suggests central authorities could have increased support for the Soviet regime by increasing transfers. This section provides a rough estimate of the size of the transfers which would have been required to preserve the Soviet Union.

Two issues must be resolved in order to select the correct compensation measure. The first issue is what constitutes a sufficient level of support for the regime. No regime has the support of all of its citizens, but if majority of citizens oppose the regime the country may become ungovernable. Because it



14

Table 5. Latvian regression results; voting equations; analysis of votes against secession

Minimum logit X1 OLS Specification (1) (2)

Constant 1.10* .657* (3.40) (16.1)

NONNAT .0424* .726* (8.52) (12.9)

City dummy - .117 - .00794

(-.67) (-0.31) R2 .9451 .9237 R2 .9396 .9187 Mean sq. error .3372 .04006 F 172.1 181.7

(3,30) (2,30) Specification (1)

(NOVOTE/PARTICIPATION1-(NOVOTE/PARTICIPATION) Dependent log variable

Weighting( [PARTICIPATION*( (NOVOTE/PARTICIPATION)* (1-NOVOTE/PARTICIPATION)]

1/2

variable

Specification (2)

( NOVOTE

Dependent PARTICIPATION ) variable


would be impossible to specify the exact minimum level of support necessary to preserve the Soviet Union two estimates are provided, corresponding to personal voting probabilities of the representative voter of 75% and 90%.

The second issue is what can be inferred about the preferences of the population from the behavior of those who participated in the referendum. The estimation above shows the existence of an electoral commission is the best predic- tor of eligibility. There are two polar interpretations of this result. The first view is that voters and non-voters were alike in their attitudes towards the Soviet regime, but voters had lower opportunity costs for participation, and the lack of a commission raised those costs. If non-participation was not a political act, then the set of voters was a random draw from the population.

The second view is that non-voters did not participate because they opposed the Soviet regime, and the lack of a commission reflects republican leaders' deference to the views of their anti-Soviet constituents. By this view non-



15

participation was a political act, and voters were a self-selected set from the population.

That the coefficients on NOCOMM in the voting regressions are not significant supports the first view. However, parameter estimates from the unconditional voting regression with the voting regression conditional on participation were significantly different, suggesting that failing to vote was not equivalent to voting "No".19

The assumption that utility functions are affine is crucial to the simple form of this compensation integral. To the extent that the average "No" voter diverges from the marginal voter the quality of this estimate will decline. In particular, voters with a stronger taste for nationalism will require higher subsidies, so these compensation estimates should be interpreted as lower bounds.

Compensation payments are calculated using estimates from each specification of the voting equation. For illustration an estimate using the first specification will be computed first. If there is not a majority in republic j, the increased subsidy necessary to ensure a representative voter has X% probability of voting for union is be determined by the following compensation integral

ln (X%j/1-X%j)

-ln (YES~/1-YES%j)

=

~dt

= Bc.(Sj-Sj) (7)

where 3c is the coefficient for SUBSIDPC. Solving for (sl - sj) gives

ln (X%i~1-X%j)

- ln (YES%~1-YES%j) Asj = (sl-s) = (8)

Bc

In the non-Russian republics, 59.96% of the adult population voted to ap- prove the referendum. Using the point estimate 3c = .0159 equation (9) implies increasing the representative voter's probability of approving the referendum to 75% requires a per voter subsidy of 141 rubles per annum:20

ln(.75/1- .75) - ln(.5996/1- .5996) = 140.75 rubles per year. (9) .00159

The calculation of the required per voter subsidy with the second specification uses the negative of the coefficient of TBALWORP in the denominator of equation (9). The calculation with the third specification uses the coefficient of TBALWORP minus the interaction coefficient in that denominator. The



16

Table 6. Estimates of required per capita subsidies based on voting regressions (all figures in 1987 rubles)

Per capita subsidy required to reach plurality of

Specification 75% 90%

(1) 140.75 1,138.40 (2) 83.85 213.34 (4) 90.02 229.02 (5) 74.06 188.43

Notes. See Table 3C for specifications. Figures computed with all significant digits, and may vary from total figures computed from reported data.

calculated subsidies range from 84 to 141 rubles for a 75% plurality, and from 188 to 1,138 rubles for a 90% plurality. These figures are reported in Table 6.

The subsidy estimate of 100 rubles will be used a central case for purposes of illustration. Added to the existing subsidy of 289 rubles per annum, the com- bined per voting age adult subsidy would have been 389 rubles per year. The non-Russian republics contained a population of 140,583,000, so the total subsidy would have had to increase from 40 billion rubles to 55 billion rubles per year. According to IMF (1990: Vol. 2, Table 111.1.8) estimates for 1989, state sector expenditures totaled 465 billion rubles and GDP was 940 billion rubles. Thus the total required subsidies would have been about 13%0 of total government spending and nearly 6% of GDP. Of course, since these subsidies would have been paid by citizens of the Russian republic, the relevant proportion would be subsidies as a percentage of Russia's GDP, obviously a far larger figure. IMF (1991) estimates put the Russian republic's net material product at about 60% of the USSR net material product, implying total required subsidies of about 10% of the Russian republic's GDP. To reach a 90% approval rating, the increase in subsidy would probably have had to be about 200 rubles per capita, implying a total transfer of almost 69 billion rubles, about 12% of Russia's GDP.

These estimates are best interpreted as an indicator of the order of magnitude of subsidies necessary to preserve the union. However, they demonstrate the scale of resources needed to ensure voluntary preservation of the union would have been large by any standard.

6. Conclusion

The empirical analysis presented above illustrates how support for the Soviet regime depended on economic and political considerations. The relationship between indirect economic subsidies to non-Russian republics and political



17

support for the Soviet regime in those republics provided the Russian republic with the means to enhance the acceptance and legitimacy of the Soviet Union.

The compensation measures derived from regression parameters indicate the amount of implicit trade subsidies the Russian republic would have had to pay to preserve the Soviet Union are on the order of 6% of Soviet GDP, or about 10% of the Russian republic's GDP. The size of these implicit subsidies may explain the willingness of the Russian republic to allow secession, and suggests efforts to form a confederation will require a substantial readjustment of interrepublic trade flows. If the new leaders of Russia have a weaker "taste" for empire they will benefit from the elimination of these indirect subsidies. If residents of the non-Russian republics correctly anticipated the effect of secession on trade flows, revealed preference suggests their "taste" for nationalism is stronger than their appetite for Soviet subsidies.

Notes

1. There are, of course, other means of maintaining an empire, including indoctrination and force. In retrospect, Soviet indoctrination was inadequate to maintain the USSR. On the other hand, the Soviet domain, like the Russian Empire before, was expanded by force and threats of force certainly played a role in its continuance. However, that force had a role does not deny a role to implicit subsidies: the presence of sticks does not imply the absence of carrots.

2. By assuming a central government seeks to obtain the voluntary cooperation of voters, this implies the government cannot gain approval by altering preferences by non-economic means (i.e., creation of "New Soviet Man' by means of education and exhortation) or through the use of force and repression, or that obtaining voluntary cooperation is less expensive than other measures.

3. The main question for the All-Union referendum was "Do you consider necessary the preservation of the Union of Soviet Socialist Republics as a renewed federation of equal sovereign republics, in which the rights and freedoms of an individual of any nationality will be fully guaranteed?" The All-Union referendum in Kazakhstan was "Do you consider necessary the preservation of the Union of Soviet Socialist Republics as a Union of equal sovereign states". There also were supplementary questions in several of the republics and in some lower level administrative areas. See Sheehy (1991: 4-6).

4. Autonomous regions and okrugs also held votes, but these data are not analyzed here. In most cases these administrative units were set up to give ethnic minorities local autonomy. Several of these autonomous regions and okrugs are located in non-Russian republics, and there has been considerable tension between those republics and the autonomous regions. Voters in most autonomous regions strongly preferred that republics not be allowed to secede, but would have wished to secede from the republic if it seceded from the USSR. Interpreting these results requires an analysis of secondary secession, which is beyond the scope of this paper.

5. Casting a spoiled ballot may be a clearer protest. However, in each of the republics studied, less than 2% of the ballots were spoiled.

6. This model is similar to Deacon and Shapiro (1975). 7. Although the March 1991 referendum was not binding, the model will be constructed "as if"

it were. 8. The coefficient ON is normalized by 1/2 in order to simplify the estimating equation (5).



18

9. Specifically, Berkson's Weighted Least Squares Method is used. This is distinct from the weighted least squares methods used for regressions with continuous LHS variables. See Mad- dala (1983: 29-30).

10. This adjustment is necessary because the number of residents on voting lists exceeded the number of residents counted in the 1989 census for some Central Asian republics. This may be due to rapid population growth rates, or to census undercounting or interrepublic mobility.

11. These data are reproduced in IMF et al. (1991). These appear to be the only data which include interrepublic trade balances at world prices.

12. The addition of NOCOMM to these regressions has no effect on results. 13. Consumer product trade balance figures are taken from (Bolotin, 1991). 14. The difference between SUBSIDPC and TBALCONS certainly reflects differences in oil de-

pendency among republics. Petroleum plays a significant role in interrepublic trade because Russia is a large oil exporter, the divergence between world and domestic oil prices was great, and oil is a critical intermediate good to many industries.

15. All data in this section are taken from Bungs (1991). 16. The ballot read "Are you for an independent and democratic Latvia?". 17. The proportion of "No" votes is used for consistency since a "Yes" vote in the Latvian poll

shows support for secession while in the Gorbachev referendum a "Yes" vote shows the op- posite.

18. A similar hypothesis cannot be tested using the logit specification because of its nonlinearity. 19. Unconditional voting regressions are not reported, but are available from the author. All three

specifications have R2 less than zero. 20. The figure 75% is arbitrarily chosen for purposes of illustration. No effort is made to estimate

what level of support would have been sufficient to maintain the Soviet Union.

References

Bolotin, B. (1991). A s chem octanyemsia mi (What will we be left with?). Argumenti ifakti 39: p. 4.

Bungs, D. (1991). Voting patterns in the Latvian independence poll. RFE/RL Research Institute Report on the USSR 3(12): 21-24.

Deacon, R. and Shapiro, P. (1975). Private preferences for collective goods revealed through voting on referenda. American Economic Review 65(5): 943-955.

IMF, World Bank, OECD and EBRD (1991). A study of the Soviet economy. Washington, DC: IMF.

Lapidus, G. (1989). Gorbachev and the 'National question': Restructuring the Soviet federation. Soviet Economy 5(3): 201-250.

Marrese, M. and Vanous, J. (1983). Soviet subsidization of trade with Eastern Europe: A Soviet perspective. Berkeley: Institute of International Studies.

Maddala, G.S. (1983). Limited-dependent and qualitative variables in econometrics. Cambridge: Cambridge University Press.

Mikhailov, L. (1990). Kto i kak zhivet (Who and how one lives). Ekonomika i Zhizn, No. 10(March): 7, 8, 16.

Pravda (1991). Ob itogakh referenduma SSSR, sostoyavshevosya 17 marta 1991 goda (On the results of the USSR referendum held 17 March 1991). Pravda (27 March): 1-2.

Sheehy, A. (1991). Fact sheet on questions on the referendum of 17 March and later referendums. RFE/RL Research Institute Report on the USSR 3(12): 4-6.

Vozrast i sostoianiye v brake naseleniya CCCP, n.d. (c. 1991). Moscow (USSR Population Growth and Composition by Category).



Documents

The Price of Nationalism: Evidence from the Soviet Union