Incremental Reform and Distortions in China’s Product and Factor Markets
AbstractThe purpose of economic reform is to reduce distortions and enhance efficiency. However, when reforms are partial and incremental, individuals and local governments are often able to capture the rent inherent in the gradual transition process. Young (2000) warned that such rent-seeking behavior might lead to increasing market fragmentation. Empirical studies have shown the opposite in the product market. This article argues that as the rent from China’s product market has been squeezed out due to deepening reforms, rent-seeking behavior may have shifted to the capital market. Further reforms are needed in the capital market to squeeze out these rent-seeking opportunities, just as those from the product and labor markets were squeezed out earlier.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 6804.
Date of creation: 2007
Date of revision:
Publication status: Published in World Bank Economic Review 21.2(2007): pp. 279-299
Market integration; China; rent seeking;
Other versions of this item:
- Kong-Yam Tan, 2007. "Incremental Reform and Distortions in China's Product and Factor Markets," World Bank Economic Review, World Bank Group, vol. 21(2), pages 279-299, March.
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
- P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-26 (All new papers)
- NEP-CNA-2008-01-26 (China)
- NEP-TRA-2008-01-26 (Transition Economics)
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