IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/3797.html
   My bibliography  Save this paper

Public Finance and the Optimal Speed of Transition

Author

Listed:
  • Castanheira, Micael

Abstract

We develop a general equilibrium model that jointly considers the influence of capital accumulation constraints and of labour market frictions on the process of transition. We endogenize the economic and budgetary costs of different government policies and show that, early in transition, governments ought to subsidize state firms. Provided that inter-temporal commitment is feasible, this policy limits the initial output fall, which relaxes capital accumulation constraints, accelerates transition, and increases welfare. Moreover, by resorting to indirect — instead of direct — taxes, governments can bring the path of transition closer to the first best. Yet, political pressures may induce a policy of excessive subsidization.

Suggested Citation

  • Castanheira, Micael, 2003. "Public Finance and the Optimal Speed of Transition," CEPR Discussion Papers 3797, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3797
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3797
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Balla, Katalin & Köllo, János & Simonovits, András, 2008. "Transition with heterogeneous labor," Structural Change and Economic Dynamics, Elsevier, vol. 19(3), pages 203-220, September.
    2. Olivier Blanchard & Michael Kremer, 1997. "Disorganization," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1091-1126.
    3. Alain de Crombrugghe & Gregory de Walque, 2011. "Wage and employment effects of a wage norm : The Polish transition experience," Working Paper Research 209, National Bank of Belgium.
    4. Maxim Bouev, 2004. "Diverging Paths: Transition in the Presence of the Informal Sector," William Davidson Institute Working Papers Series 2004-689, William Davidson Institute at the University of Michigan.
    5. Roberto Dell'Anno & Stefania Villa, 2013. "Growth in transition countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(3), pages 381-417, July.

    More about this item

    Keywords

    subsidies; transition;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3797. 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: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.