Abstract
This paper examines the sensitivity of salaries and retained earnings to enterprise income and long-term financial obligations in Yugoslav firms operating in five industries in the republic of Slovenia during the period 1979–1981. The majority of enterprises appear to retain sufficient earnings, as a result of upper limits on salaries, to cover long-term debt repayments. Yet there is evidence that debt obligations impose downward pressure on the salaries of some enterprises in three of the industries. There also exist enterprises in two of the industries with “soft budget constraints.”
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