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Dual Track Liberalization: With and Without Losers

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  • Jiahua Che
  • Giovanni Facchini

Abstract

Dual track liberalization, relying upon the continued enforcement of existing contracts and the simultaneous creation of a free market sector, represents a powerful mechanism in economic reform. If not anticipated, the reform implements an outcome that is both Pareto improving and e??ciency enhancing as compared to the status quo. We show that when the reform is anticipated, intertemporal arbitrage arises potentially undermining these properties. Only when the original policy involves both price setting and quantity restrictions can anticipated dual track liberalization maintain its attractiveness. These conditions correspond well to the circumstances faced by transition economies.

Suggested Citation

  • Jiahua Che & Giovanni Facchini, 2004. "Dual Track Liberalization: With and Without Losers," William Davidson Institute Working Papers Series 2004-661, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2004-661
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    References listed on IDEAS

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    1. Jiahua Che & Giovanni Facchini, 2004. "Dual Track Liberalization: With and Without Losers," William Davidson Institute Working Papers Series 2004-669, William Davidson Institute at the University of Michigan.
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    4. Lawrence J. Lau & Yingyi Qian & Gerard Roland, 2000. "Reform without Losers: An Interpretation of China's Dual-Track Approach to Transition," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 120-143, February.
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    Cited by:

    1. Che, Jiahua & Facchini, Giovanni, 2007. "Dual track reforms: With and without losers," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2291-2306, December.
    2. Che, Jiahua & Facchini, Giovanni, 2004. "Dual Track Liberalization: With and Without Losers," Working Papers 04-0100, University of Illinois at Urbana-Champaign, College of Business.
    3. John Bennett & Huw Dixon & Helen X.Y. Hu, 2008. "The Effects of Reforming the Chinese Dual-Track Price System," CEDI Discussion Paper Series 08-14, Centre for Economic Development and Institutions(CEDI), Brunel University.

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    More about this item

    Keywords

    Dual Track Liberalization; Intertemporal Arbitrage; Pareto Improving Reforms; China;
    All these keywords.

    JEL classification:

    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • F1 - International Economics - - Trade

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