6533b7d1fe1ef96bd125ca4f
RESEARCH PRODUCT
How Parallel Markets Fueled Chronic Shortage in the Soviet Official Sector
Mihails HazansMihails Hazanssubject
InflationInformal sectormedia_common.quotation_subjectEconomic sectorDisequilibriumPlanned economyMonetary economicsMarket economyLabour supplymedicineEconomicsmedicine.symptomAggregate supplyShadow (psychology)media_commondescription
The paper presents a disequilibrium model of a pre-transition centrally planned economy, with explicit description of labour supply to the official sector, as well as illegal economic activities. Under weak assumptions, raising official prices for deficit goods leads to even higher inflation in the shadow sector and increases the labour supply to the official sector. However, aggregate supply does not grow as much as income, and (flow) excess demand in the official sector goes up, while excess demand in the aggregate market remains positive. Simulation results suggest that our assumptions and conclusions are consistent with estimates of monetary overhang obtained (in a different way) by other authors.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 1999-01-01 | SSRN Electronic Journal |