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Soft Budget Constraints, Firm Commitments, and the Social Safety Net

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  • Daniel C. Hardy

    (International Monetary Fund)

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    Abstract

    It is shown that the inefficiencies created by the soft budget constraint enjoyed by enterprises in Eastern Europe and elsewhere will continue so long as governments are unable credibly to threaten not to bail out loss makers. The institution of a suitable social safety net can strengthen commitment to a hard budget constraint. The burden on the social safety net can be reduced by the (endogenous) development of financial markets.

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

    Volume (Year): 39 (1992)
    Issue (Month): 2 (June)
    Pages: 310-329

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    Handle: RePEc:pal:imfstp:v:39:y:1992:i:2:p:310-329

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    Cited by:
    1. Kornai, János, 2008. "A puha költségvetési korlát szindrómája a kórházi szektorban
      [The soft budget constraint syndrome in the hospital sector]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1037-1056.
    2. Perkins, Frances C., 1994. "State enterprise reform and macro-economic stability in transition economies," Kiel Working Papers 665, Kiel Institute for the World Economy.
    3. Mehrdad Vahabi, 2001. "The Soft Budget Constraint: A Theoretical Clarification," Post-Print, HAL hal-00629160, HAL.
    4. Raiser, Martin, 1993. "The no-exit economy: Soft budget constraints and the causes of success or failure of economic reforms in developing countries," Kiel Working Papers 581, Kiel Institute for the World Economy.
    5. Ernesto Crivelli & Klaas Staal, 2010. "Nationalizations and Efficiency," International Advances in Economic Research, Springer, Springer, vol. 16(2), pages 239-240, May.
    6. Csaba, László, 1995. "A nemzetközi pénzügyi szervezetek és a keleteurópai rendszerátalakító politika
      [International financial organizations and the East European policies aimed at systemic transformation]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 117-138.

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