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Learning about reform: Time-varying support for structural adjustment

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  • Veldkamp, Laura

Abstract

Political support for structural reforms can vary dramatically over time. Countries that have sustained reforms have seen their popularity grow, while others have witnessed sudden reversals of political support. Opinion can reverse itself, without any apparent provocation, when voters are learning about the effects of reform. In this model, structural adjustment causes a drop in government services and temporary unemployment. The unemployed gradually learn about when they will be re-employed. As labor markets adjust and the cost of reform is revealed, support can gradually rise, it can remain low and suddenly rise, or there can be a quick reversal of support for a previously popular policy. Cross-sectional data, event studies and case study support the explanation. Extensions consider international policies to maintain support for reform.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 18 (2009)
Issue (Month): 2 (March)
Pages: 192-206

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Handle: RePEc:eee:reveco:v:18:y:2009:i:2:p:192-206

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Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Political economy Learning Structural adjustment Policy reversals Labor matching;

References

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  1. Sanjay Jain & Sharun W. Mukand, 2003. "Redistributive Promises and the Adoption of Economic Reform," American Economic Review, American Economic Association, vol. 93(1), pages 256-264, March.
  2. Sanjay Jain & Sharun W. Mukand, 2004. "Public Opinion and the Dynamics of Reform," Discussion Papers Series, Department of Economics, Tufts University 0408, Department of Economics, Tufts University.
  3. Sebastian Edwards & Alejandra Cox Edwards, 2000. "Economic reforms and labour markets: policy issues and lessons from Chile," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 181-230, 04.
  4. Magee,Stephen P. & Brock,William A. & Young,Leslie, 1989. "Black Hole Tariffs and Endogenous Policy Theory," Cambridge Books, Cambridge University Press, number 9780521377003, December.
  5. Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
  6. Aaron Tornell, 1998. "Reform from Within," Harvard Institute of Economic Research Working Papers 1827, Harvard - Institute of Economic Research.
  7. Sebastian Edwards & Daniel Lederman, 1998. "The Political Economy of Unilateral Trade Liberalization: The Case of Chile," NBER Working Papers 6510, National Bureau of Economic Research, Inc.
  8. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
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Cited by:
  1. Sweder van Wijnbergen & Tim Willems, 2012. "Learning Dynamics and the Support for Economic Reforms: Why Good News can be Bad," Tinbergen Institute Discussion Papers 12-043/2, Tinbergen Institute.
  2. Sweder van Wijnbergen & Tim Willems, 2012. "Learning Dynamics and the Support for Economic Reforms: Why Good News can be Bad," Tinbergen Institute Discussion Papers 12-043/2, Tinbergen Institute.

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