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Shortages under Free Prices: The Case of Ukraine in 1992

Author

Listed:
  • Alexander Sundakov

    (International Monetary Fund)

  • Rolando Ossowski

    (International Monetary Fund)

  • Timothy D. Lane

    (International Monetary Fund)

Abstract

This paper examines whether shortages may occur in an economy in transition, even for goods whose prices are free. The empirical relevance of this phenomenon is suggested by a case study of Ukraine during 1992. The paper presents a model of enterprise behavior in an environment where key inputs are centrally allocated at preferential prices. It shows that the allocation of key inputs according to perceived need may create incentives for enterprises to perpetuate shortages, despite formal price liberalization. The analysis suggests that central allocation must be abolished for price liberalization to have its full efficiency effects.

Suggested Citation

  • Alexander Sundakov & Rolando Ossowski & Timothy D. Lane, 1994. "Shortages under Free Prices: The Case of Ukraine in 1992," IMF Staff Papers, Palgrave Macmillan, vol. 41(3), pages 411-434, September.
    • Handle: RePEc:pal:imfstp:v:41:y:1994:i:3:p:411-434
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    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • P22 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Prices
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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