IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Economic transformation and the fiscal crisis : a critical look at the Central European experience of the 1990s

Listed author(s):
  • Barbone, Luca
  • Marchetti, Domenico Jr.
  • DEC

The authors argue that traditional explanations of the fiscal crisis in reforming ex-socialist economies overlook crucial connections between key components of the deficit - particularly between reductions in spending and declines in revenues. Almost all studies of the fiscal aspects of the transition stress the impact on the fiscal budget of the performance crisis in state-owned enterprises. The authors contend that this aspect of the fiscal crisis has been overstated. The enterprise sector's net contribution to the government budget - that is, net income from profit taxes after subtracting subsidies - has increased during the transition in Czechoslovakia and Poland and has not changed substantially in Hungary. After reexamining the data, the authors argue that although the fiscal crisis is certainly structural, the main blame should be attributed to the explosion in spending (especially social spending) rather than to the crisis in revenues. Many of the social costs of adjustment were previously hidden within the state-owned enterprises system. These social costs include unemployment benefits and the cost of supporting - through pensions or social assistance - the people displaced from the work force by the transformation. It is important to continue reforming the tax system and tax administration - to deal with the widespread hiding of profits and cheating on taxes - but all three countries already have relatively high levels of taxation. Society in the three countries may not be willing to provide the resources required to support or extend current spending levels.

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.

File URL:
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1286.

in new window

Date of creation: 30 Apr 1994
Handle: RePEc:wbk:wbrwps:1286
Contact details of provider: Postal:
1818 H Street, N.W., Washington, DC 20433

Phone: (202) 477-1234
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1286. 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: (Roula I. Yazigi)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.