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Reform fatigue: symptoms, reasons, and implications

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Author Info

  • Eduardo Lora
  • Ugo Panizza
  • Myriam Quispe-Agnoli

Abstract

Following a period of ambitious promarket reforms, Latin American policymakers and the public at large have entered a period of “reform fatigue.” Initial enthusiasm for policies such as liberalized markets and a level field for investors has given way more recently to the view that ambitious promarket reforms are to blame for the region’s economic crises. The process of reform has stalled in some countries, and a few have suffered serious setbacks. ; To help explore the future of reform, this article aims to document and explain the symptoms of fatigue among the public, policymakers, and opinion leaders. The authors explore the economic, social, political, and psychological reasons for the fatigue. They review numerous studies that have identified various explanatory factors, including reforms’ modest economic outcomes, the failure of reforms to improve social conditions, a leftward shift of public opinion and political coalitions, and perception biases among citizens. ; The authors find that economic reasons are the primary explanation for the increasing rejection of reforms. Disillusionment with reforms, despite reforms’ overall benefits, seems to stem from people’s inability to isolate short-term macroeconomic situations from reforms’ permanent effects. ; While political reasons cannot account for reform fatigue, the authors believe that politics will play a decisive role in the future of reform. They conclude that, especially in countries where promarket reforms are well advanced, eventual economic recoveries will result in further institutional and social policy reforms.

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Bibliographic Info

Article provided by Federal Reserve Bank of Atlanta in its journal Economic Review.

Volume (Year): (2004)
Issue (Month): Q 2 ()
Pages: 1 - 28

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Handle: RePEc:fip:fedaer:y:2004:i:q2:p:1-28:n:v.89no.2

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Keywords: Economic stabilization;

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Cited by:
  1. Yuko Kinoshita & Nauro F. Campos, 2008. "Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America," IMF Working Papers 08/26, International Monetary Fund.
  2. Eduardo Lora & Mauricio Olivera, 2005. "The Electoral Consequences of the Washington Consensus," Research Department Publications 4405, Inter-American Development Bank, Research Department.
  3. Eduardo Lora & Mauricio Olivera, 2005. "Repercusiones electorales del Consenso de Washington," Research Department Publications 4406, Inter-American Development Bank, Research Department.
  4. Mariano Tommasi & Alvaro Forteza & German Herrera, 2005. "Understanding Reform in Latin America," Working Papers 88, Universidad de San Andres, Departamento de Economia, revised Dec 2005.
  5. Alvaro CUERVO-CAZURRA & Luis Alfonso DAU, 2008. "Structural Reform And Firm Profitability In Developing Countries," William Davidson Institute Working Papers Series wp940, William Davidson Institute at the University of Michigan.
  6. Haaparanta, Pertti & Pirttilä, Jukka, 2005. "Reforms and Confidence," BOFIT Discussion Papers 1/2005, Bank of Finland, Institute for Economies in Transition.
  7. Jacek Kochanowicz & Piotr Kozarzewski & Richard Woodward, 2005. "Understanding Reform: The Case of Poland," CASE Network Reports 0059, CASE-Center for Social and Economic Research.
  8. Birdsall, Nancy & de la Torre, Augusto & Caicedo, Felipe Valencia, 2010. "The Washington consensus : assessing a damaged brand," Policy Research Working Paper Series 5316, The World Bank.
  9. Ahmed, Syed & Horner, James & Rafiq, Rafiqul Bhuyan, 2008. "Financial Development and Economic Growth: Experiences of Selected Developing Economies," Review of Applied Economics, Review of Applied Economics, vol. 4(1-2).
  10. Isidro Hernández, 2003. "Las privatizaciones en Colombia," REVISTA APUNTES DEL CENES, UNIVERSIDAD PEDAGOGICA Y TECNOLOGICA DE COLOMBIA.
  11. Pablo Egaña & Alejandro Micco, 2011. "Labor Market in Latin America and the Caribbean: The Missing Reform," Working Papers wp345, University of Chile, Department of Economics.

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