Price reform and welfare: a transition model with queuing

We develop a general equilibrium model of an exchange economy with relative price distortions, where markets for consumption goods are cleared by resource-wasting queues. In general, greater distortions in relative prices lead to lower social welfare. We show, however, that in some cases a free market equilibrium may not exist if subsistence needs for commodities such as food are sufficiently high. In such an instance, removing price distortions will actually lower aggregate welfare.This paper is a revision of an essay from my dissertation at the University of Virginia. Primary thanks go to my advisors, Gerhard Glomm, Gertrude Schroeder, and Roger Sherman. Other helpful comments were made by Charles Engel, Gisela Meyer Escoe, and Chris Swann.