A MICRO-MACROECONOMIC ANALYSIS OF THE CHINESE ECONOMY WITH IMPERFECT COMPETITION

Considering that there exist both a large state sector and a fast expa nding private sector in the Chinese economy, we establish two-sector m odels to depict and investigate the macroeconomic operation of the Chi nese economy. The models embody a basic feature of the Chinese economy : the rigidity of wage rates and employee numbers in state-owned firms . Comparative static analysis of economic equilibrium shows that the e xpansion of nominal aggregate demand will raise price index and increa se real aggregate income. On the other hand, if the government enlarge s the difference between the wage rates of 'working workers' and 'wait ing workers', the economy will have a higher price index and a lower r eal aggregate income.