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The Economics of Price Scissors : An Empirical Investigation for China


  • Justin Yifu Lin

    (China Centre for Economic Research)

  • Miaojie Yu


The Sah-Stiglitz "Economics of Price Scissors' model, concerning the political economy of price scissors, formulates the optimal terms of trade against peasants. In the present paper, by extending this model to an open economy and allowing agricultural rationing, we first check if the model stands up to China's data from 1949-1992, we find that the importance of peasants in the government's objective function is less than the importance of workers. In addition, the importance of consumption is also less than that of investment. Such findings are consistent with the reality of China.

Suggested Citation

  • Justin Yifu Lin & Miaojie Yu, 2008. "The Economics of Price Scissors : An Empirical Investigation for China," Governance Working Papers 22019, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:govern:22019

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    References listed on IDEAS

    1. Knight, John & Song, Lina, 1999. "The Rural-Urban Divide: Economic Disparities and Interactions in China," OUP Catalogue, Oxford University Press, number 9780198293309, June.
    2. Knight, John, 1995. "Price Scissors and Intersectoral Resource Transfers: Who Paid for Industrialization in China?," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 117-135, January.
    3. Raaj Kumar Sah & Joseph E. Stiglitz, 1983. "The Economics of Price Scissors," NBER Working Papers 1156, National Bureau of Economic Research, Inc.
    4. Lin, Justin Yifu, 2003. "Development Strategy, Viability, and Economic Convergence," Economic Development and Cultural Change, University of Chicago Press, vol. 51(2), pages 276-308, January.
    5. Blomqvist, Ake G, 1986. "The Economics of Price Scissors: Comment," American Economic Review, American Economic Association, vol. 76(5), pages 1188-1191, December.
    6. Carter, Michael R, 1986. "The Economics of Price Scissors: Comment," American Economic Review, American Economic Association, vol. 76(5), pages 1192-1194, December.
    7. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
    8. Sah, Raaj Kumar & Stiglitz, Joseph E, 1986. "The Economics of Price Scissors: Reply," American Economic Review, American Economic Association, vol. 76(5), pages 1195-1199, December.
    9. Dominic Li & Kai Y. Tsui, 1990. "The Generalized Efficiency Wage Hypothesis and the Scissors Problem," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 144-158, February.
    10. Justin Yifu Lin, 2007. "Development and Transition : Idea, Strategy, and Viability," Development Economics Working Papers 22709, East Asian Bureau of Economic Research.
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    Cited by:

    1. Cao, Kang Hua & Birchenall, Javier A., 2013. "Agricultural productivity, structural change, and economic growth in post-reform China," Journal of Development Economics, Elsevier, vol. 104(C), pages 165-180.
    2. Cheremukhin, Anton & Golosov, Mikhail & Guriev, Sergei & Tsyvinski, Aleh, 2015. "The Economy of People’s Republic of China from 1953," CEPR Discussion Papers 10764, C.E.P.R. Discussion Papers.

    More about this item


    China; Price Scissors; trade; political economy;


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