The Transition from Dual-Track Pricing to a Market System: Winners and Losers

Posted: 26 Feb 2015

See all articles by John Bennett

John Bennett

Brunel University London - Economics and Finance; Institute for the Study of Labor (IZA); University of Wales, Swansea - School of Business and Economics; Centre for Economic Policy Research (CEPR)

Huw David Dixon

Cardiff University - Cardiff Business School

Helen Hu

Independent

Date Written: 2013

Abstract

We formulate a microeconomic model of the dual-track price system for households and use it to analyze ‘transitional policy’ reforms, i.e., a rise in the plan-track price and a reduction in the plan-track quantity. Each of these reforms has a negative effect on the market price, but a positive effect on the weighted average price (CPI). Under fairly mild assumptions, if households are heterogeneous and resale of goods can occur, transitional policy reform creates losers (state employees) as well as winners (non-state employees). Thus, although the transition from central planning to DTP potentially occurs with no losers, further reform is painful for some.

Keywords: Dual-track pricing, China

JEL Classification: P2, H3

Suggested Citation

Bennett, John and Dixon, Huw David and Hu, Helen, The Transition from Dual-Track Pricing to a Market System: Winners and Losers (2013). Economic Systems, Vol. 37, No. 1, 2013. Available at SSRN: https://ssrn.com/abstract=2569597

John Bennett (Contact Author)

Brunel University London - Economics and Finance ( email )

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Institute for the Study of Labor (IZA)

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University of Wales, Swansea - School of Business and Economics ( email )

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Centre for Economic Policy Research (CEPR)

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Huw David Dixon

Cardiff University - Cardiff Business School ( email )

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Cardiff, CF10 3EU
United Kingdom

Helen Hu

Independent ( email )

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