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The Role of the State in Making a Market Economy

Victor Nee

Journal of Institutional and Theoretical Economics (JITE), 2000, vol. 156, issue 1, 64-

Abstract: This paper highlights the crucial role of the state in establishing a market economy, through an analysis of the early stages of market-oriented reforms in China. China followed an evolutionary approach to economic reform that has relied on the preexisting state to oversee the construction of a market economy. Trial-and-error problem solving in the formative stages of market transition led the central state inexorably to oversee institutional changes to establish a modern legal-rational bureaucracy. Although the state remains structurally vulnerable to rent seeking, it gained the organizational capacity to institute and enforce rules critical to the emergence of a hybrid market economy.

JEL-codes: H1 P0 (search for similar items in EconPapers)
Date: 2000
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