Dual Track Liberalization: With and Without Losers

Jiahua Che () and Giovanni Facchini

William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Dual track liberalization, relying upon the continued enforcement of existing contracts and the simultaneous creation of a free market sector, represents a powerful mechanism in economic reform. If not anticipated, the reform implements an outcome that is both Pareto improving and e±ciency enhancing as compared to the status quo. We show that when the reform is anticipated, intertemporal arbitrage arises potentially undermining these properties. Only when the original policy involves both price setting and quantity restrictions can anticipated dual track liberalization maintain its attractiveness. These conditions correspond well to the circumstances faced by transition economies.

Keywords: Dual Track Liberalization; Intertemporal Arbitrage; Pareto Improving Reforms; China (search for similar items in EconPapers)
JEL-codes: F1 P2 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-02-01
New Economics Papers: this item is included in nep-tra
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Dual Track Liberalization: With and Without Losers (2004)
Working Paper: Dual Track Liberalization: With and without losers (2004)
Working Paper: Dual Track Liberalization: With and Without Losers (2004)
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