EconPapers    
Economics at your fingertips  
 

Public finance and the optimal speed of transition

Micael Castanheira

The Economics of Transition, 2003, vol. 11, issue 3, 435-462

Abstract: We develop a general equilibrium model that jointly considers the influence of capital accumulation constraints and of labour market frictions on the process of transition. We endogenize the economic and budgetary costs of different government policies and show that, early in transition, governments ought to subsidize state firms. Provided that intertemporal commitment is feasible, this policy limits the initial output fall, which relaxes capital accumulation constraints, accelerates transition, and increases welfare. Moreover, by resorting to indirect – instead of direct – taxes, governments can bring the path of transition closer to the first best. Yet, political pressures may induce a policy of suboptimal subsidization.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1111/1468-0351.00152

Related works:
Working Paper: Public Finance and the Optimal Speed of Transition (2003) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:etrans:v:11:y:2003:i:3:p:435-462

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0967-0750

Access Statistics for this article

The Economics of Transition is currently edited by Philippe Aghion and Wendy Carlin

More articles in The Economics of Transition from The European Bank for Reconstruction and Development Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-19
Handle: RePEc:bla:etrans:v:11:y:2003:i:3:p:435-462