Rent seeking and economic liberalization: why are China and Vietnam different from Eastern Europe?

摘要

Why did a gradualist transition approach achieve different performances among socialist economies in the 1980s? Why did some socialist economies never try a gradualist approach to economic liberalization? This paper develops a model to show that the liberalization of a socialist economy has two opposite effects on the rent captured by government. The initial economic condition determines the relative strength of the two effects, and consequently the transition path and performance. In addition, a gradualist reform strategy adopted by a rent-seeking government cannot finish the transition toward a complete market economy. To achieve that goal, a new constitutional order and the rule of law are necessary.