Does Protection Harden Budget Constraints?

Arbeitspapier

In this paper we analyse the effects of soft budget constraints in an international context. Firstly, we show that soft budget constraints in an exporting country lead to higher levels of trade protection in the recipient country. Secondly, the model predicts that protectionist trade policy helps to harden budget softness in the exporting country. We therefore argue that, when industrial policy fails to enforce financial discipline, trade policy can take over this role. Finally, we discuss potential implications of our model for EU-policy with respect to Central and Eastern Countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: LICOS Discussion Paper ; No. 98

Classification and Topics

• Classification: Wirtschaft ; Trade Policy; International Trade Organizations ; Oligopoly and Other Imperfect Markets ; Socialist Institutions and Their Transitions: Financial Economics
• Subject: Soft Budget Constraints ; Transition ; Trade Policy ; Oligopoly ; Protektionismus ; Budgetrestriktion ; Übergangswirtschaft ; Oligopol ; Theorie ; Osteuropa

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Everaert, Greetje ; Vandenbussche, Hylke
• Event: Veröffentlichung
• (who): Katholieke Universiteit Leuven, LICOS Centre for Transition Economics
• (where): Leuven
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/74953
• Last update: 10.03.2025, 11:42 AM CET