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Towards a theory of policy timing

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  • Klaus Mittenzwei
  • David S. Bullock
  • Klaus Salhofer

Abstract

The article presents a theory of policy timing that relies on uncertainty and transaction costs to explain the optimal timing and duration of policy reforms. Delaying reforms resolves some uncertainty by gaining valuable information and saves transaction costs. Implementing reforms without waiting increases welfare by adjusting domestic policies to changed market parameters. Optimal policy timing is found by balancing the tradeoff between delaying reforms and implementing reforms without waiting. Our theory offers an explanation of why countries differ with respect to the length of their policy reforms and why applied studies often judge agricultural policies to be inefficient when actually they may not be.
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  • Klaus Mittenzwei & David S. Bullock & Klaus Salhofer, 2012. "Towards a theory of policy timing," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(4), pages 583-596, October.
    • Handle: RePEc:bla:ajarec:v:56:y:2012:i:4:p:583-596
    DOI: j.1467-8489.2012.00601.x
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