Introduction of soft budget constraint as an analyzing tool into public management. The case of the Hungarian public administration reform

Rosta, Miklós (2015) Introduction of soft budget constraint as an analyzing tool into public management. The case of the Hungarian public administration reform. Working Paper. Corvinus University of Budapest Department of Comparative Economics, Budapest. (Unpublished)

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Presented at the Conference of the International Public Management Network (IPMN) “Public Management for the Future: Innovative ways of Governing and Managing”, 1-4. September 2015., Budapest


Public management reforms are usually underpinned by arguments that they will make the public administration system more effective and efficient. In practice, however, it is very hard to determine whether a given reform will improve the efficiency and effectiveness of the public administration system in the long run. Here, I shall examine how the concept of the soft budget constraint (SBC) introduced by János Kornai (Kornai 1979, 1986; Kornai, Maskin & Roland 2003) can be applied to this problem. In the following, I shall describe the Hungarian public administration reforms implemented by the Orbán government from 2010 onward and analyze its reforms, focusing on which measures harden and which ones soften the budget constraint of the actors of the Hungarian public administration system. In the literature of economics, there is some evidence-based knowledge on how to harden/soften the budget constraint, which improves/reduces the effectiveness and hence the efficiency of the given system. By using the concept of SBC, I also hope to shed some light on the rationale behind the Hungarian government’s introduction of such a contradictory reform package. Previously, the concept of SBC was utilized narrowly in public management studies, mostly in the field of fiscal federalism. My goal is to apply the concept to a broader area of public management studies. My conclusion is that the concept of SBC can significantly contribute to public management studies by deepening our knowledge on the reasons behind the success and failure of public administration reforms.

Item Type:Monograph (Working Paper)
Uncontrolled Keywords:soft budget constraint, public administration
JEL classification:H83 - Public Administration; Public Sector Accounting and Audits
Divisions:Faculty of Economics > Department of Comparative Economics
Subjects:Public administration
ID Code:2049
Deposited By: Dr. Miklós Rosta
Deposited On:11 Sep 2015 06:29
Last Modified:11 Sep 2015 06:29

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