Reform Without Losers: An Interpretation of China's Dual-Track Approach to Transition

Lawrence J. Lau, Yingyi Qian and Gérard Roland

No 137, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We develop a simple model to analyze the "dual-track" approach to transition to a market economy as a mechanism for implementing efficient Pareto-improving economic reform, that is, reform achieving efficiency without creating losers. The approach, based on the continued enforcement of the existing plan while simultaneously liberalizing the market, can be understood as a method for making implicit lump sum transfers to compensate potential losers of the reform. The model highlights the critical role of enforcement of the plan and full liberalization of the market track. We examine how the dual-track approach has worked in product and labor markets in China's economic reform in practice.

Pages: pages
Date: 1997-11-01
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Related works:
Journal Article: Reform without Losers: An Interpretation of China's Dual-Track Approach to Transition (2000)
Working Paper: Reform Without Losers: An Interpretation of China's Dual-Track Approach to Transition (1998)
Working Paper: Reform without Losers: An Interpretation of China's Dual-Track Approach to Transition (1997)
Working Paper: Reform without Losers: An Interpretation of China's Dual-Track Approach to Transition
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