Rent-Seeking and the Two-Track Price System in China

Leong H Liew

Public Choice, 1993, vol. 77, issue 2, 359-75

Abstract: A simple general equilibrium model is specified to analyze the impact on the Chinese economy of the introduction of a two-track price system on to a centrally-planned economy. It is shown that national income will rise as a result, together with a fall in the costs associated with rent-seeking. Some estimates of welfare gains and costs of rent-seeking are provided for seven commodities within a partial equilibrium framework. They are shown to be dependent on the price elasticities of demand and supply. The latter determine the ratio of plan to market prices and the share of plan in total output. Copyright 1993 by Kluwer Academic Publishers

Date: 1993
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