Macroeconomic policy and ownership structure in a mixed transition economy

Both state and non-state sectors have important roles in the Chinese econom y. A dynamic model to analyze capital accumulation in state and non-state s ectors is constructed and the fiscal and monetary policy requirements for t he coexistence of a state sector and a non-state sector are derived. Our fi ndings suggest that the effects of fiscal and monetary policies on ownershi p structure depend on which government subsidization policy is implemented. The results indicate that lowering tax rates and tightening the money supp ly can speed up the transition pace, but these policies do not necessarily contribute to developing an economy with a greater share for the non-state sector. (C) 2000 Academic Press.