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Resource Allocation During the Transition to a Market Economy :, Policy Implications of Supply Bottlenecks and Adjustment Costs, Peter Isard, Joshua Aizenman

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Resource Allocation During the Transition to a Market Economy :, Policy Implications of Supply Bottlenecks and Adjustment Costs, Peter Isard, Joshua Aizenman
Language
eng
Abstract
The paper discusses the case against a laissez faire approach to resource allocation and develops a model of supply bottlenecks. It argues that: (1) once budget constraints are hardened and credit markets begin to function appropriately, externalities associated with production bottlenecks and adjustment costs--other considerations aside--provide a case for subsidizing the costs of critical inputs for the state sector but not the new private sector; (2) the optimal subsidy declines as the private sector grows; and (3) the subsidy should be “financed” by taxing wage income in the state sector, which will strengthen incentives for workers to move
resource.governmentPublication
international or intergovernmental publication
Literary form
non fiction
Main title
Resource Allocation During the Transition to a Market Economy :
Nature of contents
dictionaries
Responsibility statement
Peter Isard, Joshua Aizenman
Series statement
IMF Working Papers
Sub title
Policy Implications of Supply Bottlenecks and Adjustment Costs