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

CEPR Discussion Paper Series Number 1798

Posted: 28 Apr 1998

See all articles by Gérard Roland

Gérard Roland

University of California, Berkeley - Department of Economics; Centre for Economic Policy Research (CEPR)

Yingyi Qian

Tsinghua University - School of Economics & Management; Centre for Economic Policy Research (CEPR)

Lawrence J. Lau

Chinese University of Hong Kong-Institute of Global Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: March 1998

Abstract

We develop a simple model to analyse 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 labour markets in China's economic reform in practice.

JEL Classification: D50, D60, P21, P22, P41

Suggested Citation

Roland, Gérard and Qian, Yingyi and Lau, Lawrence J., Reform Without Losers: An Interpretation of China's Dual-Track Approach to Transition (March 1998). CEPR Discussion Paper Series Number 1798, Available at SSRN: https://ssrn.com/abstract=80988

Gérard Roland (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-4321 (Phone)
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Yingyi Qian

Tsinghua University - School of Economics & Management

Beijing, 100084
China

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Lawrence J. Lau

Chinese University of Hong Kong-Institute of Global Economics and Finance ( email )

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12 Chak Cheung St.
Shatin, NT
Hong Kong
+852 3943-1611 (Phone)
+852 2603-5230 (Fax)

HOME PAGE: http://www.igef.cuhk.edu.hk/ljl

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