Price Liberalization in a Reforming Socialist Economy: A Search Equilibrium Approach
30 Pages Posted: 15 Feb 2006
Date Written: May 1992
A bilateral search model of the commodity market is formulated to study the effects of liberalizing prices in a reforming socialist economy. The main result is that if the competitive structure of the economy is not quickly modified to eliminate supply rents, price liberalization may be accompanied by substantial output losses. A role for tax policy in limiting output losses is identified.
JEL Classification: P22, D40, D83
Suggested Citation: Suggested Citation