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The Soft Budget Constraint: An Institutionalist Approach

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Author Info
Vahabi, Mehrdad

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Abstract

In this paper, we reconsider the concept of the BC in the light of an institutionalist approach. Kornai’s interpretation of the concept provides the basis of such an approach. He defines the BC as a conditional empirical fact regarding the specific behavioural regularity of agents that is determined by particular institutional setups. Different degrees of budget constraint (ranging from a SBC to a HBC) are thus considered as empirical facts exogenously given in different institutional contexts. In this perspective, the BC is related to the survival behaviour of boundedly rational (satisficing) agents. It implies neither market equilibrium nor optimality.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17649.

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Date of creation: 09 Nov 2002
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Handle: RePEc:pra:mprapa:17649

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Related research
Keywords: Soft budget constraint; hard budget constraint; institutions; Say’s Principle; Walras’ Law;

Find related papers by JEL classification:
P5 - Economic Systems - - Comparative Economic Systems
P2 - Economic Systems - - Socialist Systems and Transition Economies
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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  1. 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). [Downloadable!]
  2. Kornai, Janos, 1986. "The Soft Budget Constraint," Kyklos, Blackwell Publishing, vol. 39(1), pages 3-30.
  3. Okun, Arthur M, 1980. "Rational-Expectations-with-Misperceptions as a Theory of the Business Cycle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 817-25, November. [Downloadable!] (restricted)
  4. Simon, Herbert A, 1991. "Organizations and Markets," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 25-44, Spring. [Downloadable!] (restricted)
  5. Michael Keren, 1993. "On the (Im)possibility of Market Socialism," Eastern Economic Journal, Eastern Economic Association, vol. 19(3), pages 333-344, Summer. [Downloadable!]
  6. Raiser, Martin, 1994. "The no-exit economy: Soft budget constraints and the fate of economic reforms in developing countries," World Development, Elsevier, vol. 22(12), pages 1851-1867, December. [Downloadable!] (restricted)
  7. Mankiw, N. Gregory, 1992. "The reincarnation of Keynesian economics," European Economic Review, Elsevier, vol. 36(2-3), pages 559-565, April. [Downloadable!] (restricted)
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  8. Vahabi, Mehrdad, 1998. "The Relevance of the Marshallian Concept of Normality in Interior and Inertial Dynamics as Revisited by Shackle and Kornai," Cambridge Journal of Economics, Oxford University Press, vol. 22(5), pages 547-72, September.
  9. Kornai, J, 1979. "Resource-Constrained versus Demand-Constrained Systems," Econometrica, Econometric Society, vol. 47(4), pages 801-19, July. [Downloadable!] (restricted)
  10. Kaldor, Nicholas, 1972. "The Irrelevance of Equilibrium Economics," Economic Journal, Royal Economic Society, vol. 82(328), pages 1237-55, December. [Downloadable!] (restricted)
  11. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November. [Downloadable!] (restricted)
  12. Szabo, Judit, 1988. " Preliminary and Incremental Softness of the Budget Constraint: A Comment on the Gomulka-Kornai Debate," Economic Change and Restructuring, Springer, vol. 22(3), pages 109-16.
  13. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August. [Downloadable!] (restricted)
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