Irrelevance of the Soft Budget Constraint for the Shortage Phenomenon
AbstractKornai's thesis that shortage results from demand expansions bred by the soft budget constraint, derives from his implicit assumption that price regimes of input and output firms are different. Since any firm is both an input and an output firm, which discards the assumption as logically untenable, excess demand can only turn up because of lower than contracted inputs of labor and management that are not offset by an adequate downward adjustment of earnings. Expansions of demand that appear to be autonomous, are incited by uncertain deliveries of inputs, that is, by inefficiency (of output firms) as well. A by far the largest part of excess demand can be explained by state preferences for fast growth. As planners are more successful in generating investment, and the ensuing consumer, demand than in expanding production, shortage is inevitable regardless of the character of the firms' budget constraints. Copyright 1991 by Kluwer Academic Publishers
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Bibliographic InfoArticle provided by Springer in its journal Economics of Planning.
Volume (Year): 24 (1991)
Issue (Month): 1 ()
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- Mehrdad Vahabi, 2001.
"The Soft Budget Constraint: A Theoretical Clarification,"
- Mehrdad VAHABI, 2001. "The Soft Budget Constraint : A Theoretical Clarification," Discussion Papers (REL - Recherches Economiques de Louvain) 2001024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Vahabi, Mehrdad, 2003.
"La contrainte budgétaire lâche et la théorie économique
[Soft Budget Constraint and Economic Theory]," MPRA Paper 17651, University Library of Munich, Germany.
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