Easing Countries' Transitions From Price Controls and Subsidies

In transitional economies, initial popular support of market reforms is often followed by disillusionment and repudiation of the reform program. To facilitate economic transition, this paper proposes a marketable discount coupon system (DCS) that reassures the public, even as an economy moves from nonmarket to market prices. Unlike price controls, subsidies, or ration coupons, DCS involves no queuing or allocative distortions. Unlike vouchers, DCS would not be negated by inflation. To avoid distortions, discount coupons would be marketable and redeemable, even without purchase of specific products. This procedure permits efficient adjustment of domestic prices to international levels.