Soft Budget Constraints, Firm Commitments, and the Social Safety Net
AbstractIt 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 InfoArticle provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.
Volume (Year): 39 (1992)
Issue (Month): 2 (June)
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Find related papers by JEL classification:
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
- P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
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- Crivelli, Ernesto & Staal, Klaas, 2009.
"Nationalizations and effciency,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
268, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Perkins, Frances C., 1994. "State enterprise reform and macro-economic stability in transition economies," Kiel Working Papers 665, Kiel Institute for the World Economy.
- 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).
- 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.
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