Soft Budget Constraints, Transition, and Industrial Change
AbstractThis paper surveys a number of contributions that deal with the "soft budget constraint problem," that is, the refinancing of loss-making enterprises. This problem is particularly prevalent in transition economies but is also pervasive in market economies. Following Dewatripont and Maskin , the paper looks at soft budget constraints as dynamic commitment problems in the presence of sunk costs. Various ways to harden budget constraints are analyzed: privatization, demonopolization, decentralization of government, decentralization of credit, and banking reform. Finally, the paper looks at the role of budget constraints on risk taking and innovation.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 156 (2000)
Issue (Month): 1 (March)
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Find related papers by JEL classification:
- P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
- P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
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