This paper examines the changing incentives for the efficient management of firms in Eastern Europe. It contrasts the internal constitution of the firm (its governance and reward structures) with the various constraints imposed on the firm's activities by external conditions in capital, labour...

The inefficiency of Soviet-type economies results from their monopolized production structure, which makes soft budget constraints almost inevitable, as enterprises have bargaining power and must face expropriative tax rates for macroeconomic stability. Systemic reform aims to improve...

A key feature of Soviet-type economies is the excessive concentration of production and the skewed size distribution of enterprises. This is the root cause of the `soft budget constraint' and a natural outcome of the political economy of these countries. Given entrenched political support for a...