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Some Lessons from Transaction-Cost Politics for Less-Developed Countries

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  • Avinash Dixit

    ()
    (Princeton University)

Abstract

Transaction-cost politics views economic policy-making as a political process constrained by asymmetric information and limited commitment possibilities. This paper examines some implications of this perspective for less-developed countries (LDCs) considering policy reform. It emphasizes that success requires reform of the rules and institutions which govern the strategic interaction of the participants in the political game, and that reforms must cope with the special interests and asymmetric information which already exist. In this light, it examines some broad issues of the design of constitutions and institutions (definition and enforcement of property rights, control of inflation, and of government expenditures, federalism, and redistribution), as well as some specific issue of the design of organizations and incentives (problems posed by the interaction of multiple tasks and multiple interests, and their interaction with the limitations on auditing and administration that exists in many LDCs). Copyright Blackwell Publishing Ltd 2003.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Economics & Politics.

Volume (Year): 15 (2003)
Issue (Month): 2 (07)
Pages: 107-133

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Handle: RePEc:bla:ecopol:v:15:y:2003:i:2:p:107-133

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Cited by:
  1. Antonio Estache & Liam Wren-Lewis, 2009. "Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 729-70, September.
  2. Hans Pitlik, 2004. "Institutionelle Voraussetzungen marktorientierter Reformen der Wirtschaftspolitik," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 240/2004, Department of Economics, University of Hohenheim, Germany.
  3. Dani Rodrik, 2000. "Participatory Politics, Social Cooperation, and Economic Stability," American Economic Review, American Economic Association, vol. 90(2), pages 140-144, May.
  4. Patibandla, Murali, 2001. "Pattern of Foreign Direct Investment in Emerging Economies: An Exploration," Working Papers 1-2001, Copenhagen Business School, Department of International Economics and Management.
  5. Cooter, Robert D., 2005. "Law, Information, and the Poverty of Nations," Berkeley Olin Program in Law & Economics, Working Paper Series qt4hd374nq, Berkeley Olin Program in Law & Economics.
  6. Mariano Tommasi, 2006. "The Institutional Foundations of Public Policy," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  7. Carro Fernandez, Martha, 2007. "Welcoming Foreign Direct Investment? A Political Economy Approach to FDI Policies in Argentina and Brazil," MPRA Paper 47252, University Library of Munich, Germany.
  8. Murshed, S. Mansoob, 2008. "On the Non-Contractual Nature of Donor-Recipient Interaction in Development Assistance," Working Paper Series RP2008/71, World Institute for Development Economic Research (UNU-WIDER).
  9. Leoni, Patrick & Luchini, Stéphane, 2011. "Designing the financial tools to promote universal access to AIDS care," Journal of Health Economics, Elsevier, vol. 30(1), pages 181-188, January.
  10. Cooter, Robert D, 2005. "Innovation, Information, and the Poverty of Nations," Berkeley Olin Program in Law & Economics, Working Paper Series qt9sz547bd, Berkeley Olin Program in Law & Economics.
  11. Miguel Rivera-Santos & Carlos Rufín, 2010. "Odd Couples: Understanding the Governance of Firm–NGO Alliances," Journal of Business Ethics, Springer, vol. 94(1), pages 55-70, July.

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