The Economics of Price Scissors: An Empirical Investigation for China

39 Pages Posted: 27 Nov 2007 Last revised: 22 Apr 2008

See all articles by Miaojie Yu

Miaojie Yu

Peking University - China Center for Economic Research (CCER)

Justin Y. Lin

Peking University - China Center for Economic Research

Date Written: April 20, 2008

Abstract

The Sah-Stiglitz "Economics of Price Scissors" model on the political economy of price scissors derives the optimal terms of trade against peasants. In the present paper, by extending this model to an open economy and allowing agricultural rationing, we first check if the model stands up to China's data and, if so, we estimate its key structural parameters. Using province-level panel data from 1949-1992, we find that the importance of peasants in China's governmental objective function is less than the importance of workers. In addition, the importance of consumption is also less than that of capital accumulation. Such findings are consistent the reality in China.

Keywords: China, Price Scissors, Trade, Political Economy

JEL Classification: F1, O1

Suggested Citation

Yu, Miaojie and Lin, Justin Yifu, The Economics of Price Scissors: An Empirical Investigation for China (April 20, 2008). Available at SSRN: https://ssrn.com/abstract=1032404 or http://dx.doi.org/10.2139/ssrn.1032404

Miaojie Yu (Contact Author)

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, Beijing 100871
China
+86-10-6275-3109 (Phone)

HOME PAGE: http://mjyu.ccer.edu.cn

Justin Yifu Lin

Peking University - China Center for Economic Research ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

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