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How soft is the budget constraint for Yugoslav firms?


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  • Kraft, Evan
  • Vodopivec, Milan


The purpose of this paper is to show that Yugoslav firms have also been subjected to massive, pervasive redistribution through a soft budget constraint. To quantify such redistribution, the authors focus particulary on the redistributive effects of holding financial assets and liabilities in an inflationary environment in which financial claims are generally not indexed. Analyzing firm-level data for Yugoslavia's manufacturing sector for 1986, they show that such flows, in contrast to those of other Eastern European economies, have been a far more important source of redistribution than taxes and subsidies. Although Yugoslavia's channels of redistribution differ significantly from those in other socialist economies, they share a common driving force: the pursuit of job and wage security. Producers of energy, food, and heavy manufactures, as well as less developed regions, have particulary benefited from the redistribution.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 16 (1992)
Issue (Month): 3 (September)
Pages: 432-455

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Handle: RePEc:eee:jcecon:v:16:y:1992:i:3:p:432-455

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  1. R McKinnon, 1991. "Financial Control in the Transition to a Market Economy," CEP Discussion Papers dp0040, Centre for Economic Performance, LSE.
  2. Petrovic, Pavle, 1988. "Price distortion and income dispersion in a labor-managed economy: Evidence from Yugoslavia," Journal of Comparative Economics, Elsevier, vol. 12(4), pages 592-603, December.
  3. Jensen, Michael C & Meckling, William H, 1979. "Rights and Production Functions: An Application to Labor-managed Firms and Codetermination," The Journal of Business, University of Chicago Press, vol. 52(4), pages 469-506, October.
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Cited by:
  1. Claudio Djissey Shikida IBMEC-MG, 2003. "Could we build a bridge between Austrian Economics and New Institutional Economics? A Pré-History of the Soft Budget Constraint," Method and Hist of Econ Thought 0307002, EconWPA.
  2. Jan J. Rutkowski & Stefano Scarpetta, 2005. "Enhancing Job Opportunities : Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 7408, October.
  3. Vodopivec, Milan & Hribar-Milic, Samo, 1993. "The Slovenian labor market in transition : issues and lessons learned," Policy Research Working Paper Series 1162, The World Bank.
  4. Ferrero, Mario, 1999. "Heavy investment and high pollution as rational choices under socialism," European Journal of Political Economy, Elsevier, vol. 15(2), pages 257-280, June.
  5. J. Rosser & Marina Rosser, 2009. "Post-Hayekian socialism a la Burczak: Observations," The Review of Austrian Economics, Springer, vol. 22(3), pages 289-292, September.
  6. Vodopivec, Milan, 1992. "The effects of democratic determination of wages : theory and evidence from self-managed firms," Policy Research Working Paper Series 971, The World Bank.


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