Savings and retail price reform in a queue-rationed economy

The paper addresses the effect on consumer saving behavior of queue rationing and of price reform in a Soviet-type economy in a lifecycle framework with overlapping generations. It is shown that consumers save less for retirement in a queue-rationed exchange economy with black markets than they would in a free-market system with the same endowments. The expectation of price reform is thus likely to cause an increase in consumer savings. In addition, an analysis is given of the effect of the increase in controlled prices on the black market prices and on the prices of unrationed goods.