Incremental Reform and Distortions in China’s Product and Factor Markets

Xiaobo Zhang and Kong-Yam Tan

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of economic reform is to reduce distortions and enhance efficiency. However, when reforms are partial and incremental, individuals and local governments are often able to capture the rent inherent in the gradual transition process. Young (2000) warned that such rent-seeking behavior might lead to increasing market fragmentation. Empirical studies have shown the opposite in the product market. This article argues that as the rent from China’s product market has been squeezed out due to deepening reforms, rent-seeking behavior may have shifted to the capital market. Further reforms are needed in the capital market to squeeze out these rent-seeking opportunities, just as those from the product and labor markets were squeezed out earlier.

Keywords: Market integration; China; rent seeking (search for similar items in EconPapers)
JEL-codes: D33 O1 O53 P23 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cna and nep-tra
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Citations: View citations in EconPapers (17)

Published in World Bank Economic Review 21.2(2007): pp. 279-299

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Journal Article: Incremental Reform and Distortions in China's Product and Factor Markets (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:6804

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