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Price Liberalization in a Reforming Socialist Economy : A Search Equilibrium Approach

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Price Liberalization in a Reforming Socialist Economy : A Search Equilibrium Approach
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Journal Issue
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Volume/Issue:
1992/44
Series:
IMF Working Papers
Author(s):
Domenico Fanizza
Publisher:
INTERNATIONAL MONETARY FUND
Published Date:
June 1992
DOI:
http://dx.doi.org/10.5089/9781451846379.001
ISBN:
9781451846379
ISSN:
1018-5941
Page:
30
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.
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