Dynamic Commitment and the Soft Budget Constraint An Empirical Test
2010 (English)In: American Economic Journal. Economic Policy, ISSN 1945-7731, Vol. 2, no 3, 154-179 p.Article in journal (Refereed) Published
This paper develops an empirical framework for the problem of soft budgets which is explicitly based on a dynamic commitment problem, i e, the inability of a supporting organization to commit itself not to extend more resources ex post to a budget-constrained organization than it was prepared to provide ex ante Swedish local governments are used as a testing ground since the central government distributed a large number of fiscal transfers The estimated soft-budget effect is economically significant on average a local government Increases its debt by more than 20 percent by going from a hard to a soft budget constraint (JEL D82, G32, L32)
Place, publisher, year, edition, pages
2010. Vol. 2, no 3, 154-179 p.
Research subject Economics
IdentifiersURN: urn:nbn:se:su:diva-51217DOI: 10.1257/pol.2.3.154ISI: 000284559700007OAI: oai:DiVA.org:su-51217DiVA: diva2:387806
authorCount :12011-01-142011-01-102011-02-16Bibliographically approved