Economic Crisis in a Shortage Economy

Kent Osband

Journal of Political Economy, 1992, vol. 100, issue 4, 673-90

Abstract: It is not unusual for reforming socialist economies to relax wage controls without hardening budget constraints on enterprises or freeing consumer goods prices. This policy can be dangerously destabilizing. While higher wages permit workers to purchase more of some goods, they also tend to exacerbate shortages and to breed waste and corruption. Beyond a certain level, economywide wage hikes will worsen worker welfare, regardless of whether deficit goods are strictly rationed, sold randomly at official prices to queuing workers, or offered to workers by "insiders" only at black-market prices. However, the form of allocation does influence the levels of output and welfare. Copyright 1992 by University of Chicago Press.

Date: 1992
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://dx.doi.org/10.1086/261835 full text (application/pdf)
Access to full text is restricted to subscribers. See http://www.journals.uchicago.edu/JPE for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:v:100:y:1992:i:4:p:673-90

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().