Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73393
Authors: 
Kaiser, Karolina
Year of Publication: 
2008
Series/Report no.: 
BGPE Discussion Paper 62
Abstract: 
Standard models of soft budget constraints consider bailouts as pure monetary transfers. However, in practice often additional obligations or restrictions, such as savings goals, are linked to monetary bailouts. This paper analyzes in a model of a federation if such restrictions change eco- nomic outcomes in an soft budget constraint environment and under what circumstances they can increase welfare as compared to pure soft budget and hard budget regimes. We ?nd that restrictions generally harden budget constraints, but not necessarily increase welfare. The evaluation crucially depends on the tax endowment of the central government and on the shape of preferences.
Subjects: 
bailouts
soft budget constraints
federalism
JEL: 
H77
H74
H63
Document Type: 
Working Paper

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