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Piecemeal Reforms in a Transitional Economy
Author(s) -
Dinopoulos Elias,
Lane Timothy D.
Publication year - 1998
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00040
Subject(s) - economics , treasury , competition (biology) , welfare , wage , small open economy , labour economics , market economy , state (computer science) , international economics , macroeconomics , exchange rate , history , ecology , archaeology , algorithm , computer science , biology
Many transitional as well as developing economies have retained large elements of state ownership in some sectors. This paper analyzes the effects of piecemeal reforms in a small open economy in which the state enterprises’ employment and output decisions are the result of bargaining between the state treasury and enterprise “insiders.” Competition policy enhances welfare; privatization in a sector protected from foreign competition increases (lowers) welfare if state enterprises care more (less) for wage raises than for employment increases; and a small increase in the import quota has the usual welfare‐ambiguous effects. A free‐trade policy maximizes national welfare.