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Understanding the Soft Budget Constraint

János Kornai^1,2; Eric Maskin³; Gérald Roland⁴

¹ Harvard University · ² Collegium Budapest · ³ Princeton University · ⁴ University of California, Berkeley

We propose a clarification of the notion of a soft budget constraint, a concept widely used in the analysis of socialist, transitional, and market economies. Our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences. In light of this interpretation, we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics.

DOI

10.1257/jel.41.4.1095

Volume

41 (4)

Pages

1095-1136

Language

en

Export

BibTeX

Sources

crossref openalex