The labor income tax equivalent of price scissors in prereform China

In a centrally planned economy, the government can raise investable resourc es through price and wage manipulation. By treating price and wage controls as an implicit labor income taxation, we assess the scale of resource tran sfers from households to the government in prereform China. The implicit ta x revenue during the 1964 to 1978 period is estimated at 10.4% of GDP. This implicit tax led to implied reductions of 31.1 and 37.8%, respectively, in the price of agricultural goods and in the nonagricultural-sector nominal wage during the 15 years. The equivalent average labor income tax rates wer e 16.7 and 24.1% for agricultural and nonagricultural workers. (C) 2000 Aca demic Press.