NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China

Alwyn Young

NBER Working Paper No. 7828
Issued in August 2000
NBER Program(s):   EFG

In a partially reformed economy, distortions beget distortions. Segments of the economy which are freed from centralized control respond to the rent seeking opportunities implicit in the remaining distortions of the economy. The battle to capture, and then protect, these rents leads to the creation of new distortions, even as the reform process tries to move forward. In this paper I illustrate this idea with a study of the People's Republic of China. Under the plan, prices were skewed so as to concentrate profits, and hence revenue, in industry. As control over factor allocations was loosened, local governments throughout the economy sought to capture these rents by developing high margin industries. Continued reform, and growing interregional competition between duplicative industries, threatened the profitability of these industrial structures, leading local governments to impose a variety of interregional barriers to trade. Thus, the reform process led to the fragmentation of the domestic market and the distortion of regional production away from patterns of comparative advantage.

download in pdf format
   (538 K)

email paper

This paper is available as PDF (538 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Young, Alwyn. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China." The Quarterly Journal of Economics 115, 4 (Novermber 2000): 1091-1135.

Users who downloaded this paper also downloaded these:
Young w7856 Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period
Young A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore
Young w4680 The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience
Young w4482 Lessons from the East Asian NICs: A Contrarian View
Young w6657 Alternative Estimates of Productivity Growth in the NICs: A Comment on the Findings of Chang-Tai Hsieh
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us