Hardened Budgets and Enterprise Restructuring: Theory and an Application to Romania
We identify the presence of soft budgets and analyse their impact on enterprise restructuring in Romania over the initial transition period. A simple analytical framework is developed to show that hardened budget constraints foster rationalization of costs, but not active restructuring. The latter requires availability of external financing. The model emphasises the importance of the credibility of hard budgets. The empirical findings are consistent with the predictions of the model. Using a sample of over 4,000 Romanian enterprises during 1992-95, we show that hardened budget constraints induce labour shedding. There is no evidence of positive effects on active restructuring, which we define as new investments.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Sep 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1153-1191, November.
- Claessens, Stijn & Djankov, Simeon, 1999. "Enterprise performance and management turnover in the Czech Republic," European Economic Review, Elsevier, vol. 43(4-6), pages 1115-1124, April.
- Eric S. Maskin, 1999. "Recent Theoretical Work on the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 89(2), pages 421-425, May.
- Anderson, James H. & Korsun, Georges & Murrell, Peter, 2000.
"Which Enterprises (Believe They) Have Soft Budgets? Evidence on the Effects of Ownership and Decentralization in Mongolia,"
Journal of Comparative Economics,
Elsevier, vol. 28(2), pages 219-246, June.
- James H. Anderson & Georges Korsun & Peter Murrell, 1998. "Which Enterprises (Believe They) Have Soft Budgets? Evidence on the Effects of Ownership and Decentralization in Mongolia," Electronic Working Papers 98-002, University of Maryland, Department of Economics.
- Claessens, Stijn & Djankov, Simeon, 1998. "Politicians and firms in seven central and eastern European countries," Policy Research Working Paper Series 1954, The World Bank.
- Groves, Theodore & Yongmiao Hong & John McMillan & Barry Naughton, 1995. "China's Evolving Managerial Labor Market," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 873-92, August.
- Li, David D. & Liang, Minsong, 1998. "Causes of the Soft Budget Constraint: Evidence on Three Explanations," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 104-116, March.
- Djankov, Simeon & Murrell, Peter, 2002.
"Enterprise Restructuring in Transition: A Quantitative Survey,"
CEPR Discussion Papers
3319, C.E.P.R. Discussion Papers.
- Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
- Djankov, Simeon, 1999.
"The Enterprise Isolation Programme in Romania,"
CEPR Discussion Papers
2131, C.E.P.R. Discussion Papers.
- Kornai, Janos, 1998. "The Concept of the Soft Budget Constraint Syndrome in Economic Theory," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 11-17, March.
- Schaffer, Mark E., 1998. "Do Firms in Transition Economies Have Soft Budget Constraints? A Reconsideration of Concepts and Evidence," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 80-103, March.
- Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2950. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.