Guriev, Sergei (2018) Soft budget constraints and state capitalism. Acta Oeconomica, 68 (s1). pp. 115-124. ISSN 0001-6373
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Abstract
I consider the application of János Kornai’s soft budget constraint (SBC) concept to the state capitalist economy. I argue that interaction of SBC with agency problems within the government bureaucracy helps explaining a major feature of state capitalism – failure to privatize underperforming state-owned enterprises (SOEs). Bureaucrats supervising the failing SOEs prefer to keep them afloat and gamble for resurrection; in contrast, privatization would involve recognizing the loss, which would result in acknowledging the bureaucrat’s failure that is disincentivized by the state. This endogenously emerging preferential treatment of state-owned firms creates a competitive advantage against private firms; this explains why in state capitalism privatization may result in lower rather than higher productivity and therefore remain unpopular.
| Item Type: | Article |
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| Subjects: | H Social Sciences / társadalomtudományok > H Social Sciences (General) / társadalomtudomány általában |
| Depositing User: | Ágnes Sallai |
| Date Deposited: | 05 Jan 2018 07:22 |
| Last Modified: | 31 Jan 2020 00:16 |
| URI: | http://real.mtak.hu/id/eprint/71919 |
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