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Dual Track Reforms: With and Without Losers

Jiahua Che () and Giovanni Facchini

No 204, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: The dual track approach to market liberalization has been widely recognized as the key to the success of the Chinese economic reform. In this paper we study the effectiveness of this strategy in economic environments where the status quo government control is incomplete. We show that in a dynamic context intertemporal arbitrage will emerge, potentially resulting in efficiency losses and/or adverse distributional effects. Only when the status quo involves both price and quantity interventions by the government can dual track liberalization maintain its appeal. Our analysis thus suggests some caution as for the broader applicability of this reform mechanism.

Keywords: Dual Track Liberalization; Intertemporal Arbitrage; Pareto Improving Reforms; China (search for similar items in EconPapers)
JEL-codes: F1 H2 P2 (search for similar items in EconPapers)
Date: 2005-06-15
New Economics Papers: this item is included in nep-cna, nep-dev, nep-pbe, nep-sea and nep-tra
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Related works:
Journal Article: Dual track reforms: With and without losers (2007) Downloads
Working Paper: Dual Track Reforms: With and Without Losers (2007) Downloads
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