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Article

Understanding the Soft Budget Constraint

János Kornai; Eric Maskin; Gérard Roland · Journal of Economic Literature 41(4), 1095–1136 · 2003

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Type
Article
Author
János Kornai; Eric Maskin; Gérard Roland
Identifier
DOI 10.1257/jel.41.4.1095
Accessed
2026-09-01

Claims citing this source

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TheoryFormal models treat the soft budget constraint as a commitment problem: once funds are sunk, refinancing a failing project can be optimal ex post, so a sponsor cannot credibly promise not to rescue.