Overview

hard budget constraint


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A limit to spending by some private or public body, where the consequences of breaching it are expected to be significant. For example, managers whose firms fail to break even, or to achieve the required rate of profit, might expect the result to be loss of their jobs or closure of their firms. The UK privatization process was based partly on the belief that this was the only way to get people to treat budget constraints as hard. See also soft budget constraint.

Subjects: Economics.


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