A Model of Budget Constraint and Enterprise Restructuring
AbstractThis paper presents a managerial utility maximisation framework to investigate the impact of budget constraints on enterprise restructuring in transitional economies. Assuming that managerial effort is allocated between restructuring and subsidy seeking, and using non-linear programming technique, we have demonstrated that hardening budget constraint by reducing state subsidies to state firms have positive effects on managerial incentives towards enterprise restructuring. Our results apply both to the perfectly competitive case and the monopolistic case. We have, however, uncovered a perverse relationship between labour demand and wage rate.
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Bibliographic InfoPaper provided by Centre for Economic Reform and Transformation, Heriot Watt University in its series CERT Discussion Papers with number 0001.
Date of creation: 2000
Date of revision:
Find related papers by JEL classification:
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
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