Subsidies, Soft Budget Constraints and Financial Market Imperfections
In this paper we analyze the interaction between subsidies, soft budget con- straints and financial market imperfections in a simple model of occupational choice. The basic message is that the e ect of soft budget constraints has to be analyzed jointly with other possible distortions that are affecting the economy. In particu- lar in environments where there are severe forms of financial market imperfections, subsidies and soft budget constraints can ease those imperfections and reduce credit rationing problems. The "positive" effect of soft budget constraints depends also upon the degree of institutional failure of the economy.
|Date of creation:||Feb 2002|
|Date of revision:||Feb 2002|
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- Simon Johnson & John McMillan & Christopher Woodruff, 1999. "Property Rights, Finance, and Entrepreneurship," CESifo Working Paper Series 212, CESifo Group Munich.
- Haizhou Huang & Chenggang Xu, 2000.
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IMF Working Papers
00/92, International Monetary Fund.
- Haizhou Huang & Chenggang Xu, 1999. "Financial Institutions, Financial Contagion, and Financial Crises," CID Working Papers 21, Center for International Development at Harvard University.
- Huang, H. & Xu, C., 2000. "Financial Institutions, Financial Contagion, and Financial Crises," Papers 21, Chicago - Graduate School of Business.
- Haizhou Huang, 2000. "Financial Institutions, Financial Contagion, and Financial Crises," Econometric Society World Congress 2000 Contributed Papers 1595, Econometric Society.
- Haizhou Huang & Chenggang Xu, 2000. "Financial Institutions, Financial Contagion, and Financial Crises," William Davidson Institute Working Papers Series 316, William Davidson Institute at the University of Michigan.
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