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Soft Budget Constraints and Predatory States


  • Mehrdad Vahabi


The concept of the soft budget constraint (SBC) was initially formulated by economist Janos Kornai in the context of socialist economies. I argue that the SBC can be regarded as the political economy of a predatory state in both the so-called socialist and capitalist economies. The hard budget constraint (HBC) is not related to an ideal competitive market economy but to a household level budget constraint, particularly by salaried members of the population in both types of economies. JEL codes: D20, E20, P2, P5

Suggested Citation

  • Mehrdad Vahabi, 2012. "Soft Budget Constraints and Predatory States," Review of Radical Political Economics, Union for Radical Political Economics, vol. 44(4), pages 468-483, December.
  • Handle: RePEc:sae:reorpe:v:44:y:2012:i:4:p:468-483

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    References listed on IDEAS

    1. Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 9-30, Fall.
    2. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 158-183, December.
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    Cited by:

    1. repec:kap:iaecre:v:21:y:2015:i:1:p:33-40 is not listed on IDEAS
    2. Kenji Tsuji, 2015. "Bank Capital Regulation and Soft Budget Constraints," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 21(1), pages 33-40, March.

    More about this item


    soft budget constraints; hard budget constraints; predatory state; socialist economies; financial crisis;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • P5 - Economic Systems - - Comparative Economic Systems


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