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The Optimal Speed of Transition: A General Equilibrium Analysis

The Optimal Speed of Transition: A General Equilibrium Analysis We present a benchmark model for the optimal speed of transition from a state‐owned to a private market economy, based on the consumption‐savings decision in a closed economy. We abstract from frictions to focus on the macroeconomic conditions for accumulation of private capital and closure or restructuring of state‐owned enterprises. It is shown that hard budget constraints compensate for too slow speed of enterprise closure but that an excess speed of closure may slow down transition because of output contraction effects. This will especially be the case if such a deviation occurs at early stages of transition. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Economic Review Wiley

The Optimal Speed of Transition: A General Equilibrium Analysis

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References (9)

Publisher
Wiley
Copyright
Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association, 2000
ISSN
0020-6598
eISSN
1468-2354
DOI
10.1111/1468-2354.00062
Publisher site
See Article on Publisher Site

Abstract

We present a benchmark model for the optimal speed of transition from a state‐owned to a private market economy, based on the consumption‐savings decision in a closed economy. We abstract from frictions to focus on the macroeconomic conditions for accumulation of private capital and closure or restructuring of state‐owned enterprises. It is shown that hard budget constraints compensate for too slow speed of enterprise closure but that an excess speed of closure may slow down transition because of output contraction effects. This will especially be the case if such a deviation occurs at early stages of transition.

Journal

International Economic ReviewWiley

Published: Feb 1, 2000

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