Soft-Budget Constraint on Local Governments in China

Tax Systems and Tax Reforms in South and East Asia: Fiscal Federalism in the Big Developing Countries: China and India

This paper is part of a wider research on South and East Asia countries’ taxation, carried over at this Department, under the direction of L. Bernardi, A. Fraschini and P. Shome, and under the supervision of. V. Tanzi. In South and East Asian countries a highly centralized government prevails, although recently some trends are moving toward a greater degree of decentralization. Also the two gia...

Creating Incentives for Fiscal Discipline in the New South Africa 1

In a recent compilation of lessons learned about decentralization, Roy Bahl (1999) highlighted three channels through which central interventions often undermine the discipline of a hard budget constraint for local governments. These are “deficit grants” to cover year-end deficits on local government budgets, direct central government coverage of shortfalls on specific items of expenditure, and...

Soft Budget Constraints, Pecuniary Externality, and China’s Financial Dual Track

I put forward a new theoretical framework to analyze the relationship between soft budget constraint syndrome and the economic performances of firms. It differs from the existing theoretical framework, à la Dewatripont and Maskin (1995), in the soft budget constraint literature. In this paper, soft budget constraint syndrome arises when firms that are expected to lose money are financed. The pa...

Soft Budget Constraints, Pecuniary Externality, and the Dual Track System

I put forward a new theoretical framework to analyze the relationship between soft budget constraint syndrome and the economic performances of firms. It differs from the existing theoretical framework, à la Dewatripont and Maskin (1995), in the soft budget constraint literature. In this paper, soft budget constraint syndrome arises when firms that are expected to lose money are financed. The pa...

Policy Burdens, Soft Budget Constraint and State-owned Enterprise Reform in China