Price Liberalization in a Reforming Socialist Economy: A Search Equilibrium Approach

Domenico Fanizza

No 1992/044, IMF Working Papers from International Monetary Fund

Abstract: A bilateral search model of the commodity market is formulated to study the effects of liberalizing prices in a reforming socialist economy. The main result is that if the competitive structure of the economy is not quickly modified to eliminate supply rents, price liberalization may be accompanied by substantial output losses. A role for tax policy in limiting output losses is identified.

Keywords: WP; market economy; price liberalization; lump sum; constant returns to scale (search for similar items in EconPapers)
Pages: 30
Date: 1992-06-01
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