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Which Enterprises (Believe They) Have Soft Budgets? Evidence on the Effects of Ownership and Decentralization in Mongolia

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  • James H. Anderson

    (The World Bank)

  • Georges Korsun

    (Chemonics International)

  • Peter Murrell

    (Department of Economics, University of Maryland)

Abstract

To ascertain the prevalence of soft budgets and to find causes of softness, we surveyed Mongolian enterprises, asking whether state aid was expected when financial difficulties arose. One-quarter of enterprises expected soft-budgets, a large proportion of which have central government ownership. We examine causes of soft budgets in addition to state ownership, but the central government variable dominates. These results are confirmed when using instrumental variables or bivariate probit to unmask unmeasured selection effects. Local government ownership has a much weaker effect than does central ownership, suggesting the crucial role of decentralization.

Suggested Citation

  • 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.
    • Handle: RePEc:umd:umdeco:98-002
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    Cited by:

    1. Daniele Girardi & Roberto Veneziani & Susanne Wengle, 2023. "Great expectations: a tale of two transitions," Working Papers 968, Queen Mary University of London, School of Economics and Finance.
    2. Li, Lixing, 2008. "Employment burden, government ownership and soft budget constraints: Evidence from a Chinese enterprise survey," China Economic Review, Elsevier, vol. 19(2), pages 215-229, June.
    3. Randall K. Filer & Jan Hanousek, 2002. "Data Watch: Research Data from Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 225-240, Winter.
    4. Céline Bignebat & Fabian Gouret, 2008. "Determinants and consequences of soft budget constraints. An empirical analysis using enterprise-level data in transition countries," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00308719, HAL.
    5. Bignebat, C. & Gouret, F., 2006. "Which Firms Have a Soft Loan ? Managers' Believes in a Cross-Country Survey in Transition Economies," Working Papers MoISA 200603, UMR MoISA : Montpellier Interdisciplinary center on Sustainable Agri-food systems (social and nutritional sciences): CIHEAM-IAMM, CIRAD, INRAE, L'Institut Agro, Montpellier SupAgro, IRD - Montpellier, France.
    6. Kornai, János & Maskin, Eric & Roland, Gérard, 2022. "A puha költségvetési korlát - II [The soft budget constraint II]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 94-132.
    7. János Kornai, 2014. "The soft budget constraint," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 25-79, November.
    8. Michael Firth & Sonia Wong & Yong Yang, 2014. "The double-edged sword of CEO/chairperson duality in corporatized state-owned firms: evidence from top management turnover in China," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(1), pages 207-244, February.
    9. Anderson, James H. & Korsun, Georges & Murrell, Peter, 2003. "Glamour and value in the land of Chingis Khan," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 34-57, March.
    10. Kornai, János, 2014. "Bevezetés A puha költségvetési korlát című kötethez [Introduction to the author s volume entitled Soft Budget Constraint]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 845-897.
    11. Megginson, William L. & Ullah, Barkat & Wei, Zuobao, 2014. "State ownership, soft-budget constraints, and cash holdings: Evidence from China’s privatized firms," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 276-291.
    12. J. Kornai & E. Maskin & G. Roland, 2004. "Understanding the Soft Budget Constraint," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 11.
    13. Karen Eggleston & Yu-Chu Shen & Mingshan Lu & Congdong Li & Jian Wang & Zhe Yang & Jing Zhang, 2009. "Soft budget constraints in China: Evidence from the Guangdong hospital industry," International Journal of Health Economics and Management, Springer, vol. 9(2), pages 233-242, June.
    14. Mr. Alexander Pivovarsky, 2001. "How Does Privatization Work? Ownership Concentration and Enterprise Performance in Ukraine," IMF Working Papers 2001/042, International Monetary Fund.
    15. Pettersson-Lidbom, Per & Dahlberg, Matz, 2003. "An Empirical Approach for Evaluating Soft Budget Constraints," Working Paper Series 2003:28, Uppsala University, Department of Economics.
    16. Coricelli, Fabrizio & Djankov, Simeon, 2001. "Hardened Budgets and Enterprise Restructuring: Theory and an Application to Romania," Journal of Comparative Economics, Elsevier, vol. 29(4), pages 749-763, December.
    17. Xiaohan Guo & Jianliang Ye & Wunhong Su & Deming Luo & Xiangrong Jin, 2022. "Do zombie firms crowd out healthy firms and slow their growth? Evidence from China," Development Policy Review, Overseas Development Institute, vol. 40(6), November.
    18. Sangeetha Gunasekar & Jayati Sarkar, 2014. "Does autonomy matter in state owned enterprises? Evidence from performance contracts in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-034, Indira Gandhi Institute of Development Research, Mumbai, India.
    19. Bordignon, Massimo & Turati, Gilberto, 2009. "Bailing out expectations and public health expenditure," Journal of Health Economics, Elsevier, vol. 28(2), pages 305-321, March.

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    More about this item

    Keywords

    Soft Budgets; Privatization; Local Government; Mongolia; Transition;
    All these keywords.

    JEL classification:

    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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