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Goods Diversion and Repressed Inflation: Notes on the Political Economy of Price Liberalization


  • Leitzel, Jim


Most analyses of parallel markets in centrally planned systems focus on queue-rationing as the mechanism whereby state-sector goods become available for second economy resale. This article takes into account employee diversion of goods as a second channel through which merchandise can move to private markets. Diversion of goods tends to temper the adverse distributional consequences of price liberalization. As repressed inflation increases, more goods are diverted out of the state sector and the likelihood that an individual will be made worse-off by a transition of free prices is diminished. Copyright 1998 by Kluwer Academic Publishers

Suggested Citation

  • Leitzel, Jim, 1998. "Goods Diversion and Repressed Inflation: Notes on the Political Economy of Price Liberalization," Public Choice, Springer, vol. 94(3-4), pages 255-266, March.
  • Handle: RePEc:kap:pubcho:v:94:y:1998:i:3-4:p:255-66

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    References listed on IDEAS

    1. Alexeev, Michael, 1991. "If market clearing prices are so good then why doesn't (almost) anybody want them?," Journal of Comparative Economics, Elsevier, vol. 15(2), pages 380-390, June.
    2. Raul Labán & Federico Sturzenegger, 1994. "Distributional Conflict, Financial Adaptation And Delayed Stabilizations," Economics and Politics, Wiley Blackwell, vol. 6(3), pages 257-276, November.
    3. Steven T Phillips & Vincent Koen, 1993. "Price Liberalization in Russia; Behavior of Prices, Household Incomes, and Consumption During the First Year," IMF Occasional Papers 104, International Monetary Fund.
    4. Weitzman, Martin L, 1991. "Price Distortion and Shortage Deformation, or What Happened to the Soap?," American Economic Review, American Economic Association, vol. 81(3), pages 401-414, June.
    5. Alexeev, Michael V, 1988. "Market vs. Rationing: The Case of Soviet Housing," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 414-420, August.
    6. Maxim Boycko, 1992. "When Higher Incomes Reduce Welfare: Queues, Labor Supply, and Macro Equilibrium in Socialist Economies," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 907-920.
    7. Fischer, Stanley & Summers, Lawrence H, 1989. "Should Governments Learn to Live with Inflation?," American Economic Review, American Economic Association, vol. 79(2), pages 382-387, May.
    8. Drazen, Allan & Grilli, Vittorio, 1993. "The Benefit of Crises for Economic Reforms," American Economic Review, American Economic Association, vol. 83(3), pages 598-607, June.
    9. Stahl, Dale II & Alexeev, Michael, 1985. "The influence of black markets on a queue-rationed centrally planned economy," Journal of Economic Theory, Elsevier, vol. 35(2), pages 234-250, August.
    10. Polterovich, Victor, 1993. "Rationing, Queues, and Black Markets," Econometrica, Econometric Society, vol. 61(1), pages 1-28, January.
    11. Sah, Raaj Kumar, 1987. "Queues, Rations, and Market: Comparisons of Outcomes for the Poor and the Rich," American Economic Review, American Economic Association, vol. 77(1), pages 69-77, March.
    12. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-1188, December.
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    Cited by:

    1. Filippov, Mikhail G, 2002. "Russian Voting and the Initial Economic Shock of Hyperinflation," Public Choice, Springer, vol. 111(1-2), pages 73-104, March.
    2. Alexeev, Michael & Leitzel, James, 2001. "Income distribution and price controls: Targeting a social safety net during economic transition," European Economic Review, Elsevier, vol. 45(9), pages 1647-1663, October.

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