IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/93-6.html
   My bibliography  Save this paper

Resource Allocation During the Transition to a Market Economy; Policy Implications of Supply Bottlenecks and Adjustment Costs

Author

Listed:
  • Peter Isard
  • Joshua Aizenman

Abstract

The paper discusses the case against a laissez faire approach to resource allocation and develops a model of supply bottlenecks. It argues that: (1) once budget constraints are hardened and credit markets begin to function appropriately, externalities associated with production bottlenecks and adjustment costs--other considerations aside--provide a case for subsidizing the costs of critical inputs for the state sector but not the new private sector; (2) the optimal subsidy declines as the private sector grows; and (3) the subsidy should be “financed” by taxing wage income in the state sector, which will strengthen incentives for workers to move.

Suggested Citation

  • Peter Isard & Joshua Aizenman, 1993. "Resource Allocation During the Transition to a Market Economy; Policy Implications of Supply Bottlenecks and Adjustment Costs," IMF Working Papers 93/6, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:93/6
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=1174
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joshua Aizenman & Peter Isard, 1995. "Production bottlenecks and resource allocation during the transition to a market economy," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(3), pages 321-331, September.
    2. Aizenman, Joshua & Isard, Peter, 1996. "Production bottlenecks and congestion externalities during the transition to a market economy," International Review of Economics & Finance, Elsevier, vol. 5(3), pages 225-241.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:93/6. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi). General contact details of provider: http://edirc.repec.org/data/imfffus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.