Breach of Contract in the Soviet Economy

Kroll, Heidi

doi:10.1086/467826

Cited by 16 publications

(4 citation statements)

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“…Thus, on a more grounded level, the system used 'common' material incentives: meeting the plan was rewarded by bonuses, which constituted a significant part of the income of managers and employees (Kroll, 1987). At the same time, failure to meet the plan was sanctioned by cuts or elimination of these bonuses and eventually (in extreme cases) by replacement of top managers (Rutland, 1985).…”

Section: Description Of the Functioning Of The Cpe Systemmentioning

confidence: 99%

“…The reaction of the planners towards the possible meeting or not meeting of the plan was varied: for the hierarchy, it was complicated to distinguish the reasons why the plan was/was not met. Kroll (1987) writes about the virtual impossibility to separate external causes of lack of performance from the internal ones. He refers to planning mishaps, mismanagement and the 'possibility of suboptimizing behaviour' as a consequence of enterprise incentives in the Soviet contracting system (Kroll, 1987).…”

Section: Description Of the Functioning Of The Cpe Systemmentioning

confidence: 99%

“…Kroll (1987) writes about the virtual impossibility to separate external causes of lack of performance from the internal ones. He refers to planning mishaps, mismanagement and the 'possibility of suboptimizing behaviour' as a consequence of enterprise incentives in the Soviet contracting system (Kroll, 1987). Ben-Ner and Neuberger (1988) add that an opportunistic official would have shirked information collection and processing to simulate adherence to rules and that would have created inferior-information plans.…”

Section: Description Of the Functioning Of The Cpe Systemmentioning

confidence: 99%

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Misreporting in financial statements in a centrally planned economy: The case of Czechoslovak state-owned enterprises in late socialism

2022

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Communist economies of the former Eastern Bloc were driven by systems of central planning. The central plan set detailed goals to be achieved by the state-owned enterprises, which often struggled to meet them and obtain bonuses or avoid the related sanctions. In line with the principal-agent theory, we study the behaviour of managers of the Czechoslovak state-owned enterprises in this specific environment and investigate the possibility of using creative accounting methods and other methods to cover failures in meeting those plans. Statistical analysis based on accounting records from the 1970s and 1980s recovered from state archives indicates that meeting the central plans targets was often achieved through false reporting. This conclusion is further supported by two series of 75 and 80 interviews with former managers of socialist state-owned enterprises. We expect our findings to hold for other centrally planned economies, as managers’ original motivations were distorted by features which were inherent to the centrally planned system itself.

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Section: Description Of the Functioning Of The Cpe Systemmentioning

confidence: 99%

Section: Description Of the Functioning Of The Cpe Systemmentioning

confidence: 99%

Section: Description Of the Functioning Of The Cpe Systemmentioning

confidence: 99%

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Misreporting in financial statements in a centrally planned economy: The case of Czechoslovak state-owned enterprises in late socialism

2022

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“…The sector with a high degree of centralization relies on commands in enforcement of contracts, as well as in undertaking of economic activity (Kroll 1987, Pistor 1996. Certainty of enforcement in the state sector, as opposed to its uncertainty in the market sector, reflects the observation that in a formerly planned economy the state sector legal provisions are highly developed and well understood, while those necessary for emerging markets are patchy, inadequate, and confusing (Gray 1993, Pistor 1996, Rubin 1997, EBRD 1999.…”

Section: A Simple Model 21 Assumptions and Timingmentioning

confidence: 99%

On Corruption and Institutions in Decentralized Economies

Andrianova

2007

The B.E. Journal of Theoretical Economics

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This paper presents a model of opportunistic behaviour in decentralized economic exchange and considers the impact of inadequate institutional framework of formal contract enforcement on economic performance. It is shown that (i) when the number of cheating traders is sufficiently large, inadequate institutions result in a loss of decentralized trading contracts, (ii) an adequate institutional framework, while being necessary for the attainment of a Pareto optimal outcome, may not be sufficient if traders perceive it as inadequate; and (iii) sufficiently good formal enforcement provisions help deter contractual breach in enviroments with corrupt and powerful enforcers.

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