Disorganization

QUARTERLY JOURNAL OF ECONOMICS Vol CXII Issue 4, November 1997

Posted: 10 Jun 1998

See all articles by Olivier J. Blanchard

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Michael Kremer

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER); Center for Global Development; Harvard University - Harvard Kennedy School (HKS)

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Abstract

Under central planning, many firms relied on a single supplier for critical inputs. Transition has led to decentralized bargaining between suppliers and buyers. Under incomplete contracts or asymmetric information, bargaining may inefficiently break down, and if chains of production link many specialized producers, output will decline sharply. Mechanisms that mitigate these problems in the West, such as reputation, can only play a limited role in transition. The empirical evidence suggests that outputs has fallen farthest for the goods with the most complex production process, and that disorganization has been more important in the former Soviet Union than in the Central Europe.

JEL Classification: E10, P1, E32

Suggested Citation

Blanchard, Olivier J. and Kremer, Michael R., Disorganization. QUARTERLY JOURNAL OF ECONOMICS Vol CXII Issue 4, November 1997. Available at SSRN: https://ssrn.com/abstract=58377

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Peter G. Peterson Institute for International Economics ( email )

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Michael R. Kremer

Harvard University - Department of Economics ( email )

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Brookings Institution

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National Bureau of Economic Research (NBER) ( email )

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Center for Global Development

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Harvard University - Harvard Kennedy School (HKS) ( email )

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