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Decentralized Socialism and Macroeconomic Stability: Lessons from China

Author

Listed:
  • Gang Fan
  • Wing Thye Woo

Abstract

Using a survey of 300 state-owned enterprises (SOEs), we argue that the acceleration of inflation in China after 1984 was caused by the decentralization reforms in the state sector. These reforms allowed the SOEs to realize their innate tendencies to over-consume and over-invest. The evidence suggests that the increasing government budget deficits were caused by an upward "wage drift"; and that there has been a decline in production efficiency in the 1984-88 period.

Suggested Citation

  • Gang Fan & Wing Thye Woo, 1993. "Decentralized Socialism and Macroeconomic Stability: Lessons from China," WIDER Working Paper Series wp-1993-112, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-1993-112
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    File URL: https://www.wider.unu.edu/sites/default/files/WP112.pdf
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    Cited by:

    1. Park, Albert & Sehrt, Kaja, 2001. "Tests of Financial Intermediation and Banking Reform in China," Journal of Comparative Economics, Elsevier, vol. 29(4), pages 608-644, December.

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