The Welfare Costs of Price Controls for Cars and Color Televisions in Poland: Contrasting Estimates of Rent-Seeking from Recent Experience

The welfare costs of price controls can vary enormously, depending on the method of allocating the good in shortage and the possible rent-seeking costs that may result. With full rent dissipation, the welfare loss from price controls on Polish color televisions in 1989 was about ten times the standard estimates of distortion costs, which ignore rent-seeking, and was more than 100 percent of the value of domestic producers’ sales. The methods of allocating cars, however, did not result in rent-seeking costs. The domestic price controls were an unintended implicit subsidy to imports. Subsidies for cars were estimated at 43 percent and for color televisions at 22 percent.