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

Posted: 22 Aug 2000

See all articles by Lawrence J. Lau

Lawrence J. Lau

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

Yingyi Qian

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

Gérard Roland

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

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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

Lau, Lawrence J. and Qian, Yingyi and Roland, Gérard, Reform Without Losers: An Interpretation of China's Dual-Track Approach to Transition. Available at SSRN: https://ssrn.com/abstract=202381

Lawrence J. Lau (Contact Author)

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

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

Yingyi Qian

Tsinghua University - School of Economics & Management

Beijing, 100084
China

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Gérard Roland

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

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-4321 (Phone)
510-642-6615 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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