Who Adjusts and When? On the Political Economy of Reforms


Alesina, Alberto, Silvia Ardagna, and Francesco Trebbi. 2006. “Who Adjusts and When? On the Political Economy of Reforms”. Copy at http://www.tinyurl.com/y64xn25y
2007_14_alesina.pdf394 KB


Why do countries delay stabilizations of large and increasing budget deficits and inflation? And what explains the timing of reforms? We use the war of attrition model as a guidance for our empirical study on a vast sample of countries. We find that stabilizations are more likely to occur when time of crisis occur, at the beginning of term of office of a new government, in countries with "strong" governments, (i.e. presidential systems and unified governments with a large majority of the party in office), and when the executive faces less constraints. The role of external inducements like IMF programs has at best a weak effect, but problems of reverse causality are possible.


WCFIA Working Paper No. 07-14, February 2006

Last updated on 03/21/2015