Soft Budget Constraints, Enterprise Restructuring, and Economic Reform Policy: The Cases of Bulgaria and Romania

Gelu Calacean and Paul Aligica

Eastern European Economics, 2004, vol. 42, issue 1, 75-95

Abstract: This article uses the soft budget constraint (SBC) approach in order to explore an important facet of Romanian and Bulgarian economic reform experiences in the post-communist period. Comparative analysis framed on SBC lines reveals several major areas of convergence and divergence between the policies adopted by the two states, and explains the success and failure of solving the crucial problem of enterprise restructuring in these two countries. With these ends in view, the article outlines the notion of SBC and discusses its relevance for transition economies. It provides a brief overview of the ways in which various methods address and present the SBC problem. Finally SBC and enterprise restructuring in the context of general reform packages in Bulgaria and Romania are addressed in the light of the conceptual and analytic clarifications presented in the article.

Date: 2004
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