Soft Budgets and Hard Rents: A Note

Chris Scott

Economic Change and Restructuring, 1990, vol. 23, issue 2, 117-27

Abstract: This note shows how Kornai's concept of the soft budget constraint can be decomposed into separate elements of technical inefficiency and relative price distortion. The distinction between r-budget softness and m-budget softness introduced by Gomulka is shown to correspond to the equivalent and compensating variation measures of efficiency loss. It is also argued that budget softness should be viewed as the outcome of a rent-seeking process in which a firm's action in the control sphere incurs an opportunity cost in the real sphere. Adopting such a perspective leads to a redefinition of the resource loss associated with budget softness and results in much higher estimates of the social costs of soft budgets than those proposed in the existing literature. Copyright 1990 by Kluwer Academic Publishers

Date: 1990
References: Add references at CitEc
Citations: View citations in EconPapers (3)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:kap:ecopln:v:23:y:1990:i:2:p:117-27

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/10644/PS2

Access Statistics for this article

Economic Change and Restructuring is currently edited by George Hondroyiannis

More articles in Economic Change and Restructuring from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().