Externalities. Incentives, and Economic Reforms
The paper emphasizes the role of institutions and incentives in the presence of externalities. An economy with multiple public decision makers is likely to experience 'overspending,' 'undertaxing,' 'overborrowing,' and 'overinflation' unless effective institut...
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| Format: | eBook |
| Language: | English |
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Washington, D.C.
International Monetary Fund
1990
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| Series: | IMF Working Papers
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| Online Access: | |
| Collection: | International Monetary Fund - Collection details see MPG.ReNa |
| Summary: | The paper emphasizes the role of institutions and incentives in the presence of externalities. An economy with multiple public decision makers is likely to experience 'overspending,' 'undertaxing,' 'overborrowing,' and 'overinflation' unless effective institutions exist for overcoming coordination failure. External financing may weaken incentives for adjustment over the longer run unless assistance is made conditional on fundamental institutional reforms. The paper also analyzes reforms that strengthen incentives to provide effort. Uncertainty regarding future taxes reduces present effort and the responsiveness of output to market signals. In addition, the paper addresses the adverse effects of bank insurance and soft budget constraints |
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| Physical Description: | 40 pages |
| ISBN: | 9781451926477 |