Dual Track Reforms: With and Without Losers
AbstractThe dual track approach to market liberalization has been widely recognized as the key to the success of the Chinese economic reform. In this paper we study the effectiveness of this strategy in economic environments where the status quo government control is incomplete. We show that in a dynamic context intertemporal arbitrage will emerge, potentially resulting in efficiency losses and/or adverse distributional effects. Only when the status quo involves both price and quantity interventions by the government can dual track liberalization maintain its appeal. Our analysis thus suggests some caution as for the broader applicability of this reform mechanism.
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Bibliographic InfoPaper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 204.
Date of creation: 15 Jun 2005
Date of revision:
Dual Track Liberalization; Intertemporal Arbitrage; Pareto Improving Reforms; China;
Other versions of this item:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- P2 - Economic Systems - - Socialist Systems and Transition Economies
- F1 - International Economics - - Trade
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-09 (All new papers)
- NEP-CNA-2006-07-09 (China)
- NEP-DEV-2006-07-09 (Development)
- NEP-PBE-2006-07-09 (Public Economics)
- NEP-SEA-2006-07-09 (South East Asia)
- NEP-TRA-2006-07-09 (Transition Economics)
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- Jiahua Che & Giovanni Facchini, 2004.
"Dual Track Liberalization: With and Without Losers,"
William Davidson Institute Working Papers Series
2004-669, William Davidson Institute at the University of Michigan.
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