Growth Slowdown Under Central Planning: A Model of Poor Incentives

Zuzana Brixiova () and Ales Bulir ()

No 448, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan Stephen M. Ross Business School

Abstract: 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.

Keywords: Political Economy; Central planning; incentives; growth (search for similar items in EconPapers)
JEL-codes: D73 O41 P21 (search for similar items in EconPapers)
Date: 2002-03-01
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Persistent link: http://EconPapers.repec.org/RePEc:wdi:papers:2002-448

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