Plan Evasion and Supply Instability in a Double-Track System

In the reforms of centrally planned economies (CPEs), variants of thedouble-track system as a transitional measure. While there have been somestudies of the system from the demand side, little effort has been spentby economists to analyze its consequences from the t supply side. Thispaper is an attempt to do so in a disequilibrium framework. We show thatgiven a particular form of plan evasion, it is possible for the plannedprice to affect output, a result which contrasts with that of a generalequilibrium model (Sicular, 1988). Moreover, quantum changes in supplycould take place, generating instability in the system. The model isextended into a two-product case, where we illustrate that supplyinstability may still take place. Some alleviating factors that reducefluctuations are then discussed.