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How Reform Worked in ChinaThe Transition from Plan to Market$
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Yingyi Qian

Print publication date: 2017

Print ISBN-13: 9780262534246

Published to MIT Press Scholarship Online: May 2018

DOI: 10.7551/mitpress/9780262534246.001.0001

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Coordinating Reforms in Transition Economies

Coordinating Reforms in Transition Economies

(p.361) 12 Coordinating Reforms in Transition Economies
How Reform Worked in China

Yingyi Qian

The MIT Press

This paper analyzes how differences in organizational forms of centralized economies in the Soviet Union and China affected their reforms and transition paths. It addresses the question of why China succeeded in applying the experimental approach to reform whereas Eastern Europe and the former Soviet Union economies failed. Our answer is based on how government organizations are structured and the effect it has on their coordination capacity. We model the coordination of specialized tasks inside an organization as "attribute matching" and compare organizational forms (U-form in the Soviet Union and M-form in China) in coordinating reforms. Compared to the U-form, the M-form has a distinctive advantage in carrying out experimentation and thus is more flexible in reforms, although it suffers from higher costs due to a lack of scale economies.

Keywords:   Transition economy, Centralized economy, Government organizations, Attribute matching, Coordinating reform, experimentation

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