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The transition from dual-track pricing to a market system: Winners and losers

  • Bennett, John
  • Dixon, Huw
  • Hu, Helen X.Y.

We formulate a microeconomic model of the dual-track price system for households and use it to analyze ‘transitional policy’ reforms, i.e., a rise in the plan-track price and a reduction in the plan-track quantity. Each of these reforms has a negative effect on the market price, but a positive effect on the weighted average price (CPI). 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). Thus, although the transition from central planning to DTP potentially occurs with no losers, further reform is painful for some.

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Article provided by Elsevier in its journal Economic Systems.

Volume (Year): 37 (2013)
Issue (Month): 1 ()
Pages: 30-44

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Handle: RePEc:eee:ecosys:v:37:y:2013:i:1:p:30-44
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  1. Liew, Leong H, 1993. " Rent-Seeking and the Two-Track Price System in China," Public Choice, Springer, vol. 77(2), pages 359-75, October.
  2. Guy Shaojia Liu & Haiyan Song, 2003. "A Dual-Price Demand Theory for Economies under Transition," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 1(2), pages 185-203.
  3. Lawrence J. Lau & Yingyi Qian & Gerard Roland, . "Pareto-Improving Economic Reforms through Dual-Track Liberalization," Working Papers 97007, Stanford University, Department of Economics.
  4. Basu, Kaushik & Emerson, Patrick M., 2000. "The Economics of Tenancy Rent Control," Working Papers 00-04, Cornell University, Center for Analytic Economics.
  5. Sah, Raaj Kumar & Srinivasan, T. N., 1988. "Distributional consequences of rural food levy and subsidized urban rations," European Economic Review, Elsevier, vol. 32(1), pages 141-159, January.
  6. Byrd, William A., 1987. "The impact of the two-tier plan/market system in chinese industry," Journal of Comparative Economics, Elsevier, vol. 11(3), pages 295-308, September.
  7. Dixon, Huw, 1987. "The General Theory of Household and Market Contingent Demand," The Manchester School of Economic & Social Studies, University of Manchester, vol. 55(3), pages 287-304, September.
  8. Dixon, Huw David, 1993. "Macroeconomic Equilibrium and Reform in a Transitional Economy," CEPR Discussion Papers 758, C.E.P.R. Discussion Papers.
  9. Gautam Jaggi & Mary Rundle & Daniel H. Rosen & Yuichi Takahashi, 1996. "China's Economic Reforms: Chronology and Statistics," Working Paper Series WP96-5, Peterson Institute for International Economics.
  10. 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.
  11. 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.
  12. Michael W. Bell & Kalpana Kochhar & Hoe Ee Khor, 1993. "China at the Threshold of a Market Economy," IMF Occasional Papers 107, International Monetary Fund.
  13. Gao, X. M. & Wailes, Eric J. & Cramer, Gail L., 1996. "Partial Rationing and Chinese Urban Household Food Demand Analysis," Journal of Comparative Economics, Elsevier, vol. 22(1), pages 43-62, February.
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