Growth Slowdown Under Central Planning: A Model of Poor Incentives
Centrally planned economies tend to be less efficient than economies in which agents are free to choose their output targets, as well as the means to meet them. This paper presents a simple model of planner-manager interactions and shows how planned economies can end up in a low-effort, low-output equilibrium even though they may have started in a high-effort, high-output equilibrium.
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