Disorganization

Olivier Blanchard and Michael Kremer

No 38, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Under central planning, many firms relied on a single supplier for critical inputs. Transition has led to decentralized bargaining between suppliers and buyers. Under incomplete contracts or asymmetric information, bargaining may inefficiently break down, and, if chains of production link many specialized producers, output will decline sharply. Mechanisms that mitigate these problems in the West, such as reputation, can only play a limited role in transition. The empirical evidence suggests that output has fallen furthest for the goods with the most complex production process, and that disorganization has been more important in the former Soviet Union than in Central Europe.

Pages: pages
Date: 1997-01-01
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Related works:
Journal Article: Disorganization (1997)
Working Paper: Disorganization (1997)
Working Paper: Disorganization (1996)
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