Disorganization

53 Pages Posted: 2 May 1997 Last revised: 24 Jun 2008

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)

Multiple version iconThere are 2 versions of this paper

Date Written: January 15, 1997

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 (January 15, 1997). MIT Department of Economics Working Paper No. 96-30. Available at SSRN: https://ssrn.com/abstract=8755 or http://dx.doi.org/10.2139/ssrn.8755

Olivier J. Blanchard (Contact Author)

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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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