The Regulatory Policy Institute Research Group

Regulating the Finances of State-Owned Enterprises in Central and Eastern Europe

The paper starts with a reinterpretation of the debate between Janos Kornai and Stanislaw Gomulka on causes of shortages in the Soviet-type economies (STEs). The paper discusses both economic and political aspects of control of firms’ finances and shows that the solution of the agency problem by regulation alone must lead to very disappointing results.

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