Abstract: The determination of an effective frontier between government and market is crucial to the stable and efficient operation of the financial system. This paper shows that the relationship between government and market should be placed and analyzed in the “continuous spectrum” of the economic development. In practice, the effective frontier between government and market not only is under constant evolution in line with economic development, but also exhibits significant changes across different nations and economies with respect to their different “national endowments”. A reasonable determination of the effective frontier between government and market needs to embed their endogenous relationship into a more general set of institutional constraints and to take the dynamic process and mechanisms of the economic development into consideration as well. The key issue is that government and market should play different roles in different areas and on different levels according to their comparative advantages respectively.
Keywords: Government, Market, National Endowment, Effective Frontier
source:Finance & Trade Economics ,No3,2014