复旦大学：《发展经济学》阅读材料与文献_Reform Without Losers：An Interpretation of China's Dual-Track Approach to Transition.pdf_大学文库

REFORM WITHOUT LOSERS 121 Efficiency-enhancing economic reform should potentially allow win- ners to compensate losers, thereby making the reform Pareto- improving. However, in practice, it seems very difficult to find mech- anisms that make economic reform Pareto-improving, and even more difficult for reform to be simultaneously Pareto-improving and efficient, because of distortionary costs of compensation or the lack of credibility of its implementation. We demonstrate in this paper that a simple mechanism of a"dual-track"approach, as used in Chinas economic reform, can serve to implement efficient Pareto- proving economic reform. The basic principle of the dual-track approach is as follows. Under the plan track, economic agents are assigned rights to and obligations for fixed quantities of goods at fixed plan prices as specified in the preexisting plan. In addition,a market track is introduced under which economic agents participate in the market at free-market prices, provided that they fulfill their obligations under the preexisting plan We distinguish two types of market liberalization in this context. We refer to it as"limited market liberalization''if market resales of plan-allocated goods and market purchases by planned suppliers for fulfilling plan-mandated delivery quotas are not permitted. Thus under limited market liberalization, planned suppliers must cally produce all plan-mandated output deliveries and physical all plan-allocated inputs themselves even though it might have cheaper to sell the inputs on the market track and purchase the same output from the market track for redelivery. In contrast,we refer to it as"full market liberalization" if market resales and market purchases for redelivery are all allowed by a planned supplier or a rationed user, as long as its obligations under the plan are all ful- filled Within the conventional supply and demand framework, we ana yze various distributional and efficiency aspects of the dual-track mechanism. We show that, independently of the initial conditions concerning supply and demand, as long as the preexisting feasible plan continues to be enforced appropriately, the dual-track proach to market liberalization is always Pareto-improving. In addi- tion, it also achieves efficiency under full market liberalization and other usual conditions such as profit maximization and perfect com- The idea that the dual-track approach can provide a concrete mechanism for the implementation of efficient Pareto-improving re- See Lau, Qian, and Roland (1997) for a general equilibrium analysis

JOURNAL OF POLITICAL ECONOMY form is both simple and subtle. The introduction of the market track provides the opportunity for economic agents who participate in it to be better off, whereas the maintenance of the plan track provides implicit transfers to compensate potential losers from the market liberalization by protecting the status quo rents under the preex isting plan. Thus the dual-track approach is, by design, Pareto- improving. Moreover, as the compensatory transfers are inframargi nal and thus lump-sum in nature, the dual-track approach can be fficient too. One desirable feature of the dual-track approach is its minimal additional informational and institutional requirements: it utilizes the existing information contained in the original plan and enforces the plan through existing planning institutions. No new information and no new institutions are needed While the"single-track"(or"big-bang")full market liberaliza- tion will lead to efficiency under the usual conditions such as profit maximization and perfect competition, Pareto improvement cannot in general be assured. In contrast, the dual-track full market liberal ization provides a useful way to implement a reform without creating losers while simultaneously achieving efficiency under the same con ditions. In transition economies under both democratic and non democratic systems, there is a need to buy off bureaucrats, govern ment employees, workers, and consumers accustomed to receiving implicit subsidies and to prevent reform reversal being pushed by coalitions hurt by the reform. Because of its Pareto-improving prop erty, the dual-track approach minimizes political opposition to re form ex ante and maximizes political opposition to reversal of re form ex post. Enforcement of the plan track is crucial for preserving the preexisting rents. Sufficient state enforcement power is needed here not to implement an unpopular reform, but to carry out a re- form that creates no losers, only winners An implicit guiding principle underlying Chinas economic re form strategy since 1979 has been that reform should proceed with- out creati ng losers, and the dual-track approach has mechanism to achieve that objective The agricultural market liber- 2 The term um transfers"as used here simply means that the transfers are independent of the actions of the individual nic agents. The values of such transfers may depend on market prices. The principle of reform without losers has been perceived as Wu and Zhao 1987; Zhang and Yi 1995; Lin, Cai, and Li 1996)ar ts on the ide China (e.g, McMillan and Naught 995) have made informal discuss s on the issue, they have not presented form alysis and systematic evidence. The only exceptions are Sicular(1988)and Byrd (1991), who analyzed the dual-track pricing in Chinas agricultural and industrial reforms, respectively

REFORM WITHOUT LOSERS alization illustrates that the dual-track approach can be both Pareto- improving and efficient. The commune(and later the households) assigned the responsibility to sell a fixed quantity of output to the state procurement agency as previously mandated under the plan it predetermined plan prices and to pay a fixed tax(often in kind to the government. It also has the right(and obligation) to receive a fixed quantity of inputs, principally chemical fertilizers, from state owned suppliers at predetermined plan prices Subject to fulfilling hese conditions, the commune is free to produce and sell whatever it considers profitable and retain any profit. Moreover, the com mune can purchase from the market grain(or other) output for resale to the state in fulfillment of its responsibility. There is thus full market liberalization Beyond the Chinese experience, schemes involving various forms of grandfathering"in the West resemble the dual-track approach For example, the two-tier wage system with lower wages for newly hired personnel and higher wages for existing personnel has been used in some industries such as the U.S. airline industry. Discussions of pension reform involving the transition from "pay as you go"to funded pension schemes also feature similar considerations The rest of the paper is organized as follows. We present a theoret- ical analysis of the dual-track liberalization in Section II. In Section Ill, we discuss the conditions for the success of the dual-track ap- proach. In Section IV, we examine to what extent these conditions were fulfilled in China and provide examples of its dual-track experi- ence in product and labor markets. Section V presents concluding remarks I. The Theoretical Analysis In order to understand fully the dual-track mechanism, we consider a variety of possible market situations concerning demand and sup- ply. Since the plan price and quantity are fixed by the state, they need bear no particular relationship to the market equilibrium price and quantity and can be either below or above the market price and quantity, respectively. The plan prices of most normal producer and consumer goods are likely to be below the market prices; however, the preexisting total compensation(wage plus housing, health, and ension benefits) of workers in state-owned enterprises(SOEs)un- der the plan may well be above the market wage rate. Similarly, while high-quality goods are often in short supply under the plan, the plan production of low-quality and unwanted goods may be gr eater than the total demand under full market liberalization furthermore in general, there is no reason to assume that the planned output is

REFORM WITHOUT LOSERS Suppose first that the plan price is Pi, below P: Under the plan the rationed users have a surplus given by the area bounded by ABCG; the planned suppliers have a planned profit/loss equal to area GCDF. With the dual track, the surpluses of the rationed users and the planned suppliers remain exactly the same, by design. Com- pared to the outcome of the single-track liberalization, there is an implicit lump-sum transfer equal to(Pt- PnQ from the planned suppliers to the rationed users so that the latter and the former are both no worse off than before. However, the new users and suppli- BED. The analysis is similar if the plan price is P?, above PE. Note that in this special case of efficient rationing and efficient planned supply the introduction of the market track achieves effi- ciency even under limited market liberalization. The reason is that the most deserving users and the most efficient suppliers are already under the plan track, and they would have been the first users and suppliers in a fully liberalized market in any case ye next consider the general case in which Q is not necessarily located to users with the highest willingness to pay and some the planned suppliers may have higher marginal costs than other potential suppliers In figure 2, we represent the willingness to pay curve of the rationed users by a generic curve AH and the marginal cost curve of the planned supply by a generic curve Fl In contrast to the special case above, the allocative outcome now depends on whether there is limited or full liberalization of the mar- ket track. Under limited liberalization, the plan track and the market track are completely segregated; therefore, in our partial equilib- rium framework the market track consists of only the residual demand and supply, that is, total demand and supply reduced, re spectively, by the rationed demand and planned supply. Their inter- section represents the limited market liberalization equilibrium While under limited liberalization the dual-track approach is Pareto- improving, it cannot in general achieve efficiency because one can- not rule out the possibility that a rationed user may have ness to pay below PE, or a planned supplier may have its marginal cost above P. In fact, the following proposition shows that limited liberalization of the market track always leads to inefficiency in the form of overproduction relative to the fully liberalized market equi- libri Note that in a general equilibrium framework, an equilib der a fully liber lized dual-track approach is generally not the proach because of differences in the distribution of income(see Lau et al. 1997) ever, efficiency holds in either case

REFORM WITHOUT LOSERS the total demand curve is monotonically decreasing, Q+Q 2Q implies PM s PE Q.E.D We now analyze full liberalization of the market track. Rationed users are now allowed to resell rationed goods in the market as long as Q is delivered to and accepted by them at plan price Pr. Similarly, planned suppliers are allowed to purchase the goods in the market to fulfill their delivery obligations at plan price Pr instead of produc ing the goods themselves. Thus the market consists of the total de- mand and supply Suppose that the plan price Pl is below PE. Under the plan, the rationed users have a surplus given by the area under the rationed demand curve AH less the rectangle Pi e planned suppliers have a planned profit/ loss equal to the difference between Pr Q and the area under the planned supply curve Fl Compared to the outcome of the single-track liberalization, the dual-track liberaliza- tion entails an implicit lump-sum transfer equal to the rectangle Ph.Q from the planned suppliers to the rationed users. As a result, a rationed user whose willingness to pay is greater than or equal to P and a planned supplier whose marginal cost is less than or equal to P will have their prereform rents unchanged. A rationed user whose willingness to pay is less than P will still accept delivery from planned suppliers at the plan price but will resell the plan- allocated inputs on the market at price P, thereby obtaining a sur plus equal to Pe- Pr. This corresponds to the common practice of resale"of rationed goods. A planned supplier whose marginal cost is above P will still deliver to its rationed users their plan-mandated supplies at the plan price, but instead of producing them, he will try to purchase them on the market at price P for redelivese thereby limiting his loss to only PE- Pr. This corresponds to common practice of" subcontractingby inefficient planned suppli- ers to more efficient suppliers. Clearly, the rationed users and the planned suppliers are no worse off than before; and at least some of them are even better off. Thus Pareto improvement and efficien are simultaneously attained A similar argument can be made for P? above P, as, for example in the context of a labor market. Under the dual-track approach an enterprise whose marginal product of labor exceeds or equals P will also have its prereform rents unchanged. An enterprise whose marginal product of labor is below PE will still pay the plan wage but will"resell", its labor on the market for p, thereby limiting its loss to the difference between P? and PE. This corresponds to the com- mon practice of "labor reallocation. Reallocated workers preserve their preexisting rents because they continue to receive a total com- pensation equal to the plan rather than the market wage rate. Simi-

JOURNAL OF POLITICAL ECONOMY larly, those workers whose reservation wages are less than or equal to P will also have their prereform rents unchanged. Those workers whose reservation wages are above PE will receive P2-PE and be replaced by workers whose reservation wage is below or equal to pE at market wage P. This corresponds to the common practice of"lab ibstitution, "which can take different forms. For example, a worker may be persuaded to take an early retirement package, or a worker may resign in exchange for a job for his or her child or relative, who may have a lower reservation wage. The rents received by existing workers under the plan are preserved in the form of (implicit) lump- sum transfers from the SOEs to the existing workers The discussion above is summarized by the following proposition PROPOSITIoN 2. If the plan quantity is less than the fully liberalized market equilibrium quantity, then, independently of the initial con- ditions concerning the plan price and the degree of efficiency of rationed demand and planned supply, (1)the dual-track approach with either limited or full liberalization of the market track is pareto- improving and(2) the dual-track approach with full liberalization of the market track achieves efficiency Now consider sequential dual-track liberalization of the market in the following fashion: in a first stage, limited market liberalization is implemented, and then in a second stage, full market liberaliza tion is implemented. By proposition 1, the first-stage limited market liberalization leads to inefficient overproduction; by proposition 2, the second-stage full market liberalization implies efficiency, and thus there must be production contraction. Furthermore, in the first stage, when one goes from a centrally planned economy to limited market liberalization, Pareto improvement is clearly attained, but efficiency cann be guaranteed. In the second stage, when full liber alization is introduced, compared with the terminal point of the first stage,the reform is still Pareto-improving for agents within the plan but is not necessarily Pareto-improving for agents outside the plan although efficiency is attained. Therefore, the sequential dual-track liberalization may result in some opposition to further reforms (from some agents outside the plan)after the first and before the second stage, whereas the dual-track full market liberalization imple mented in one stroke will not. Nevertheless, it is also clear that even under the sequential dual-track liberalization, there are no losers at the end of the second stage relative to the status quo before the reforn It is useful to compare our results with those of the related litera- argument,if there are black marketeers before the reform, they are likely to be made worse off by full market libe