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Soft budget constraint theories: from centralization to the market

Maskin, Eric and Xu, Cheng-Gang (2001) Soft budget constraint theories: from centralization to the market. 2715. Centre for Economic Policy Research, London, UK.

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Abstract

budget constraints (SBC) on economies in transition from centralization to capitalism; it also reviews our understanding of SBC in general. It focuses on the conception of the SBC syndrome as a commitment problem. We show that the two features of SBC in centralized economies ex post renegotiation of firms’ financial plans and a close administrative relationship between firms and the centre are intrinsically related. We examine a series of theories (based on the commitment-problem approach) that explain shortage, lack of innovation in centralized economies, devolution, and banking reform in transition economies. Moreover, we argue that SBC also bear on major issues in economics, such as the determination of the boundaries and capital structure of a firm. Finally, we show that SBC theory sheds light on financial crises and economic growth.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.cepr.org
Additional Information: © 2001 the authors
Library of Congress subject classification: H Social Sciences > HG Finance
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General
D - Microeconomics > D2 - Production and Organizations > D20 - General
H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H70 - General
P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P30 - General
G - Financial Economics > G2 - Financial Institutions and Services > G20 - General
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J20 - General
G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O30 - General
P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P20 - General
Sets: Collections > Economists Online
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 2715
Date Deposited: 05 Jun 2008 13:38
URL: http://eprints.lse.ac.uk/5419/

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