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A note on the Bauer-Kornai investment cycle theory


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  • Heng-fu Zou

    (Public Economics Division, World Bank)


This short paper has formulated the Bauer-Kornai investment cycle theory in a dynamic system of shortage and the investment rate: when the actual investment rate is higher (lower) than the normal one, the shortage intensity tends to intensify (decrease); when the shortage intensity is above (below) the norm, social planners react to lower (raise) the investment rate. This approach of adjustment by norm has been widely applied to empirical work on investment fluctuations in socialist countries, though the rationality of the investment cycles has been ignored by many. Here it has been shown that this cycle model can be explicitly derived from the rational choice of social planners.

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Bibliographic Info

Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 97.

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Length: 7 pages
Date of creation: 1995
Date of revision:
Publication status: Published in China Economic Review, Volume 4, Issue 1, Spring 1993, Pages 75-81
Handle: RePEc:cuf:wpaper:97

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  1. Zou, Heng-fu, 1991. "Socialist economic growth and political investment cycles," Policy Research Working Paper Series 615, The World Bank.
  2. Roland, Gerard, 1987. "Investment growth fluctuations in the Soviet Union: An econometric analysis," Journal of Comparative Economics, Elsevier, vol. 11(2), pages 192-206, June.
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Cited by:
  1. Junlu Ma & Zeguang Li & Qunyong Wang, 2009. "Financial constraints, agency cost and firm’s investment behavior: Evidence from listed companies of China," Frontiers of Economics in China, Springer, vol. 4(3), pages 384-405, September.


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