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The Effects of Reforming the Chinese Dual-Track Price System

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Author Info
John Bennett ()
Huw Dixon ()
Helen X.Y. Hu ()

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Abstract

We formulate a microeconomic model of the dual-track price system for Households and use it to analyze 'transitional policy' reforms, which we characterize as a rise in plan-track price and a reduction in the plan-track quantity. Each of these reforms has a negative effect on market price, but a positive effect on the weighted average price (CPI). When households are homogeneous, transitional policy reform reduces welfare (if profits are not fully distributed). Under fairly mild assumptions, if households are heterogeneous and resale of goods can occur, transitional policy reform creates losers (state employees) as well as winners (non-state employees).

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Paper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 08-14.

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Length: 36 pages
Date of creation: Jul 2008
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Handle: RePEc:edb:cedidp:08-14

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  1. Guy Shaojia Liu & Haiyan Song, 2003. "A Dual-Price Demand Theory for Economies under Transition," Journal of Chinese Economic and Business Studies, Taylor and Francis Journals, vol. 1(2), pages 185-203, January. [Downloadable!] (restricted)
  2. Jiahua Che & Giovanni Facchini, 2004. "Dual Track Liberalization: With and without losers," Econometric Society 2004 Latin American Meetings 123, Econometric Society. [Downloadable!]
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  3. Bennett, John & Dixon, Huw David, 1995. "Macroeconomic equilibrium and reform in a transitional economy," European Economic Review, Elsevier, vol. 39(8), pages 1465-1485, October. [Downloadable!] (restricted)
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  4. Justin Lifu Lin, 2004. "Lessons of China's Transition from a Planned Economy to a Market Economy," Development Economics Working Papers 446, East Asian Bureau of Economic Research. [Downloadable!]
  5. Bennett, John & Dixon, Huw David, 1996. "A Macrotheoretic Model of the Chinese Economy," Journal of Comparative Economics, Elsevier, vol. 22(3), pages 277-294, June. [Downloadable!] (restricted)
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  6. Dixon, Huw, 1987. "The General Theory of Household and Market Contingent Demand," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 55(3), pages 287-304, September.
  7. Michael W. Bell & Kalpana Kochhar & Hoe Ee Khor, 1993. "China at the Threshold of a Market Economy," IMF Occasional Papers 107, International Monetary Fund.
  8. Sicular, Terry, 1988. "Plan and Market in China's Agricultural Commerce," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 283-307, April. [Downloadable!] (restricted)
  9. Li, Shaomin & Li, Shuhe & Zhang, Weiying, 2000. "The Road to Capitalism: Competition and Institutional Change in China," Journal of Comparative Economics, Elsevier, vol. 28(2), pages 269-292, June. [Downloadable!] (restricted)
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