Growth Slowdown in Bureaucratic Economic Systems: An Issue Revisited

Ales Bulir and Zuzana Brixiová Schwidrowski

No 2001/006, IMF Working Papers from International Monetary Fund

Abstract: Bureaucratically organized systems 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 bureaucratic economies can end up in a low-effort, low-growth equilibrium even though they may have started in high-effort , high-growth equilibrium. The empirical evidence from eight Central and Eastern European countries during 1948-49 is consistent with our model results, namely, that the growth decline was systemic in nature. The results are applicable to countries in other regions with heavy bureaucratic involvement in the economy.

Keywords: WP; economic system; planned economy; production function; Bureaucracy; planning; growth; CEE economy; CEE country; underperformance vis-à-vis; output target; Consumption; Technological innovation; Eastern Europe (search for similar items in EconPapers)
Pages: 36
Date: 2001-01-01
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Citations: View citations in EconPapers (5)

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