A Theory of the Soft-Budget Constraint
Chong-En Bai and
No 298., Boston College Working Papers in Economics from Boston College Department of Economics
This paper studies the soft budget constraint problem in a principal-agent model. The agent screens projects of and makes initial investment in the projects that have passed the screening. He then finds the types of the funded projects and decides to close some of the ex post inefficient ones among them. Closing projects sends an unfavorable signal about the agent's screening effort. Under the ex ante efficient contract, the agent has incentive to refinance some of the ex post inefficient projects.
Keywords: soft budget; planner; project screening; information (search for similar items in EconPapers)
JEL-codes: D82 P51 (search for similar items in EconPapers)
Pages: 33 pages
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:298
Access Statistics for this paper
More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().