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Accessible Pareto-Improvements: Using Market Information to Reform Inefficiencies

dc.contributor.authorMandler, Michaelen_US
dc.date.accessioned2006-08-01T16:25:19Z
dc.date.available2006-08-01T16:25:19Z
dc.date.issued2001-05-01en_US
dc.identifier.otherRePEc:wdi:papers:2001-398en_US
dc.identifier.urihttps://hdl.handle.net/2027.42/39782en_US
dc.description.abstractWe study Pareto improvements whose implementation requires knowledge of only market prices and traded quantities, not utility and demand functions. Quantity stabilizations (for example, the Lau, Qian, and Roland model of dual-track reform) give agents the right to repeat their earlier trades and hence require policymakers to know the quantities agents previously exchanged. While reasonable in some partial equilibrium contexts, such knowledge is implausible in general equilibrium. To diminish informational requirements further, we also consider price stabilizations, which hold constant the relative prices that consumers face. Although price stabilizations do not achieve first-best efficiency, they lead to Pareto-improvements and production efficiency. Moreover, the production efficiency advantage persists under price stabilization but not under quantity stabilization when some firms are not profit-maximizes; this difference can be critical in transition policies for planned economies. In addition to planning, we consider several other applications of quantity and price stabilization, both partial equilibrium and general equilibrium: removal of rent controls, deregulation of a cross-subsidizing public utility, and the entry of an autarkic economy into world trade. Not surprisingly, the most plausible candidates for quantity or price stabilization occur in partial equilibrium settings. Finally, we discuss some difficulties specific to general equilibrium models of transition economies. When the state completely rations trades under planning, it will usually need to operate at a deficit. Under reform, the state must raise revenue to close this deficit, and that will frequently prevent quantity stabilizations from achieving a Pareto improvement. But ex ante deficits do no pose a problem for price stabilization reform strategies.en_US
dc.format.extent95373 bytes
dc.format.extent3151 bytes
dc.format.extent232869 bytes
dc.format.mimetypetext/plain
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dc.format.mimetypeapplication/pdf
dc.language.isoen_USen_US
dc.relation.ispartofseries398en_US
dc.subjectPareto Improvements, Transition Policy, Dual-track Reforms, International Trade, Rent Control, Deregulationen_US
dc.titleAccessible Pareto-Improvements: Using Market Information to Reform Inefficienciesen_US
dc.typeWorking Paperen_US
dc.subject.hlbsecondlevelEconomicsen_US
dc.subject.hlbtoplevelBusinessen_US
dc.description.bitstreamurlhttp://deepblue.lib.umich.edu/bitstream/2027.42/39782/3/wp398.pdfen_US
dc.owningcollnameWilliam Davidson Institute (WDI) - Working Papers


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