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Fiscal Constraintson Market-Oriented Reform in a Socialist Economy
Author:
Mr. Elias Dinopoulos null

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Mr. Timothy D. Lane
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Series:
IMF Working Papers
Volume/Issue:
Volume 1991: Issue 075
Language:
English
Publication Date:
01 Aug 1991
DOI:
https://doi.org/10.5089/9781451849639.001
ISBN:
9781451849639
ISSN:
1018-5941
Pages:
38
Keywords:
WP; state enterprise; marginal revenue; socialized enterprise; firm's indifference curve; labor-managed firm; enterprise manager; monopoly rent; enterprises vis-à-vis; enterprise sector; enterprise council; Wages; Employment; Trade liberalization; Trade barriers; Eastern Europe
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper develops a simple two-sector model of a socialist economy, in which government revenues required for servicing external debt are obtained from taxation of the socialized sector and from import taxes. Wages and employment in the socialized sector are the outcome of Nash bargaining between the government and an import-competing labor-dominated state enterprise with domestic market power. The effects of trade liberalization, demonopolization, technical improvements, and limitations on labor’s bargaining power are examined, and the implications for privatization are considered. It is shown that some combination of tax reform and debt reduction may be a precondition for market-oriented reforms.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund