Dual Track Liberalization: With and Without Losers

29 Pages Posted: 1 Feb 2004

See all articles by Jiahua Che

Jiahua Che

affiliation not provided to SSRN

Giovanni Facchini

Tinbergen Institute

Date Written: January 2004

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 efficiency 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.

JEL Classification: P2, F1

Suggested Citation

Che, Jiahua and Facchini, Giovanni, Dual Track Liberalization: With and Without Losers (January 2004). Available at SSRN: https://ssrn.com/abstract=491402 or http://dx.doi.org/10.2139/ssrn.491402

Jiahua Che

affiliation not provided to SSRN ( email )

Giovanni Facchini (Contact Author)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

HOME PAGE: http://paople.few.eur.nl/facchini

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