The transition from central planning to a market economy: A computable general equilibrium model |
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Authors: | J M Pogodzinski Claudia Antes |
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Institution: | 1. Department of Economics, San José State University, 95192, San José, CA, USA 2. Department of Economics, Boston College, 02167, Chestnut Hill, MA, USA
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Abstract: | This paper develops a computable general equilibrium (CGE) model of the transition from a central planned economy to a market economy. The model is an extension of Wellisz and Findlay's (1986) model of the Soviet ‘second economy.’ By distinguishing alternative assumptions about the disposition of the government budget, two model variants — the ‘activist’ and ‘non-activist’ — are analyzed. Equilibria of these model variants are computed for various parameter specifications of the Kantorovich ray, which represents the stringency of central planners' direction of the economy. The paper shows that increasing efficiency of the private sector, while it reduces the size of government subsidies to the state sector, does not necessarily increase the net government budget. |
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