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Discussion Paper Details

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Title: Fiscal Constraints and the Speed of Transition

Author(s): Bankim Chadha and Fabrizio Coricelli

Publication Date: July 1994

Keyword(s): Fiscal Constraints, Restructuring, Transition and Unemployment

Programme Area(s): International Macroeconomics

Abstract: This paper develops a model of the process of reallocation of resources from a declining state sector to an expanding private sector. The transition is shown to be costly in that it entails unemployment and a deterioration of the fiscal balance. The interaction of fiscal constraints with the transition process is examined. It is shown that fiscal constraints may induce the government to maintain the state sector, slowing the speed of transition, and could jeopardize the eventual outcome of the process of restructuring.

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Bibliographic Reference

Chadha, B and Coricelli, F. 1994. 'Fiscal Constraints and the Speed of Transition'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=993