Decentralized Socialism and Macroeconomic Stability: Lessons from China

Gang Fan and Wing Thye Woo

No wp-1993-112, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: Using a survey of 300 state-owned enterprises (SOEs), we argue that the acceleration of inflation in China after 1984 was caused by the decentralization reforms in the state sector. These reforms allowed the SOEs to realize their innate tendencies to over-consume and over-invest. The evidence suggests that the increasing government budget deficits were caused by an upward "wage drift"; and that there has been a decline in production efficiency in the 1984-88 period.

Keywords: Budget deficits; Economic growth; Government business enterprises; Inflation; Socialism (search for similar items in EconPapers)
Date: 1993
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