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Quantifying second best effects in grossly distorted markets: The case of the butter market in Poland


  • Tarr, David


We develop and empirically implement a model to examine a market in a centrally planned economy characterized by a complicated maze of interrelated and offsetting distortions: the butter market in Poland. Eliminating all distortions in the butter market results in substantial structural changes and benefits to Poland. However, we find one case in which removing a distortion while others distortions remain in place results in substantial welfare losses, in classic second best fashion. Moreover, piecemeal reduction of some of the distortions results in much smaller benefits due to the offsetting effects.
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  • Tarr, David, 1990. "Quantifying second best effects in grossly distorted markets: The case of the butter market in Poland," Journal of Comparative Economics, Elsevier, vol. 14(1), pages 105-119, March.
  • Handle: RePEc:eee:jcecon:v:14:y:1990:i:1:p:105-119

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    References listed on IDEAS

    1. Joseph Greenberg, 1979. "Existence and Optimality of Equilibrium in Labour-managed Economies," Review of Economic Studies, Oxford University Press, vol. 46(3), pages 419-433.
    2. Meade, James E, 1972. "The Theory of Labour-Managed Firms and of Profit Sharing," Economic Journal, Royal Economic Society, vol. 82(325), pages 402-428, Supplemen.
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    4. Laffont, Jean-Jacques & Moreaux, Michel, 1983. "The Nonexistence of a Free Entry Cournot Equilibrium in Labor-Managed Economies," Econometrica, Econometric Society, vol. 51(2), pages 455-462, March.
    5. Steinherr, A. & Thisse, J. -F., 1979. "Are labor-managers really perverse?," Economics Letters, Elsevier, vol. 2(2), pages 137-142.
    6. Chiarella, Carl & Sertel, Murat R., 1986. "Competitive capitalism and cooperative labor management in a dynamic nutshell," European Journal of Political Economy, Elsevier, vol. 2(4), pages 499-519.
    7. Aaftink,Jan & Ireland,Norman & Sertel,Murat, 1982. "On Cournot-Nash Equilibria with Exogenous Uncertainty," The Warwick Economics Research Paper Series (TWERPS) 210, University of Warwick, Department of Economics.
    8. Dow, Gregory K., 1986. "Control rights, competitive markets, and the labor management debate," Journal of Comparative Economics, Elsevier, vol. 10(1), pages 48-61, March.
    9. Meade, James E, 1974. "Labour-Managed Firms in Conditions of Imperfect Competition," Economic Journal, Royal Economic Society, vol. 84(336), pages 817-824, December.
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    Cited by:

    1. Tarr, David, 1991. "When does rent-seeking augment the benefits of price and trade reform on rationed commodities? : estimates for automobiles and color televisions in Poland," Policy Research Working Paper Series 741, The World Bank.
    2. Morris Morkre & David Tarr, 2014. "Reforming Hungarian Agricultural Trade Policy: A Quantitative Evaluation," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 3, pages 49-74 World Scientific Publishing Co. Pte. Ltd..
    3. Howard J. Shatz & David G. Tarr, 2017. "Exchange Rate Overvaluation and Trade Protection: Lessons from Experience," World Scientific Book Chapters,in: Trade Policies for Development and Transition, chapter 5, pages 115-127 World Scientific Publishing Co. Pte. Ltd..

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations


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