Market reform and state paternalism in Hungary: a path-dependent approach

Benczes, István (2009) Market reform and state paternalism in Hungary: a path-dependent approach. Working Paper. Transformation, Integration and Globalization Economic Research (TIGER), Warsaw.

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Hungary is one of the worst-hit countries of the current financial crisis in Central and Eastern Europe. The deteriorating economic performance of the country is, however, not a recent phenomenon. A relatively high ratio of redistribution, a high and persistent public deficit and accelerated indebtedness characterised the country not just in the last couple of years but also well before the transformation, which also continued in the postsocialist years. The gradualist success of the country – which dates back to at least 1968 – in the field of liberalisation, marketisation and privatisation was accompanied by a constant overspending in the general government. The paper attempts to explore the reasons behind policymakers’ impotence to reform public finances. By providing a path-dependent explanation, it argues that both communist and postcommunist governments used the general budget as a buffer to compensate losers of economic reforms, especially microeconomic restructuring. The ever-widening circle of net benefiters of welfare provisions paid from the general budget, however, has made it simply unrealistic to implement sizeable fiscal adjustment, putting the country onto a deteriorating path of economic development.

Item Type:Monograph (Working Paper)
Series Name:TIGER Working Papers Series
Uncontrolled Keywords:individual-specific uncertainty, gradualism, paternalism, fiscal profligacy, Hungary, JEL codes: P26, P35
Divisions:Faculty of Economics > Department of World Economy
Subjects:Economic policy
ID Code:325
Deposited By: Ádám Hoffmann
Deposited On:04 Apr 2011 14:07
Last Modified:18 Oct 2021 08:48

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