Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74953
Authors: 
Everaert, Greetje
Vandenbussche, Hylke
Year of Publication: 
2001
Series/Report no.: 
LICOS Discussion Paper 98
Abstract: 
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.
Subjects: 
Soft Budget Constraints
Transition
Trade Policy
Oligopoly
JEL: 
F13
L13
P34
Document Type: 
Working Paper

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