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When Are Stabilizations Delayed? Alesina-Drazen Revisited

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Author Info

  • Cesar Martinelli

    ()
    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

  • Raul Escorza

    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

Abstract

In an influential article, Alesina and Drazen (1991) model delay of stabilization as the result of a struggle between political groups supporting reform plans with different distributional implications. In this paper we show that ex ante asymmetries in the costs of delay for the groups will reduce the probability of conflict and will lead to a shorter expected delay. Accurate common information about the cost of delay may lead to no delay at all. In an asymmetric conflict, a wider divergence in the distributional implications of reform will reduce the probability of conflict but will lead to a longer expected delay.

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File URL: http://ftp.itam.mx/pub/academico/inves/martinelli/04-08.pdf
File Function: First version, 2004
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Bibliographic Info

Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0408.

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Length: 28 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:cie:wpaper:0408

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Related research

Keywords: Stabilization delay; economic reforms; war of attrition;

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References

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  1. Casella, Alessandra & Eichengreen, Barry, 1996. "Can Foreign Aid Accelerate Stabilisation?," Economic Journal, Royal Economic Society, vol. 106(436), pages 605-19, May.
  2. Christina D. Romer & David H. Romer, 1998. "Monetary Policy and the Well-Being of the Poor," NBER Working Papers 6793, National Bureau of Economic Research, Inc.
  3. Allan Drazen & Vittorio Grilli, 1990. "The Benefits of Crises for Economic Reforms," NBER Working Papers 3527, National Bureau of Economic Research, Inc.
  4. Barry Nalebuff & John G. Riley, 1984. "Asymmetric Equilibrium in the War of Attrition," UCLA Economics Working Papers 317, UCLA Department of Economics.
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  6. Erosa, Andres & Ventura, Gustavo, 2002. "On inflation as a regressive consumption tax," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 761-795, May.
  7. Hsieh, Chang-Tai, 2000. "Bargaining over reform," European Economic Review, Elsevier, vol. 44(9), pages 1659-1676, October.
  8. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482 Elsevier.
  9. Perraudin, William & Sibert, Anne, 2000. "The Timing of Multilateral Lending," Economic Journal, Royal Economic Society, vol. 110(460), pages 192-211, January.
  10. Levent Kockese & Efe A. Ok, 2002. "Strategic delegation by unobservable incentive contracts," Discussion Papers 0102-26, Columbia University, Department of Economics.
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  13. Cukierman, Alex & Tommasi, Mariano, 1998. "When Does It Take a Nixon to Go to China?," American Economic Review, American Economic Association, vol. 88(1), pages 180-97, March.
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  15. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
  16. Daron Acemoglu & Simon Johnson & James Robinson & Yunyong Thaicharoen, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," NBER Working Papers 9124, National Bureau of Economic Research, Inc.
  17. Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661314, December.
  18. Fudenberg, Drew & Tirole, Jean, 1986. "A Theory of Exit in Duopoly," Econometrica, Econometric Society, vol. 54(4), pages 943-60, July.
  19. Enrico Spolaore, 2004. "Adjustments in Different Government Systems," Economics and Politics, Wiley Blackwell, vol. 16(2), pages 117-146, 07.
  20. Raul Labán & Federico Sturzenegger, 1994. "Distributional Conflict, Financial Adaptation And Delayed Stabilizations," Economics and Politics, Wiley Blackwell, vol. 6(3), pages 257-276, November.
  21. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  22. Guidotti, Pablo E & Vegh, Carlos A, 1999. "Losing Credibility: The Stabilization Blues," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 23-51, February.
  23. Vijay Krishna & John Morgan, 1994. "An Analysis of the War of Attrition and the All-Pay Auction," Game Theory and Information 9409002, EconWPA.
  24. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
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Citations

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Cited by:
  1. Paulo Júlio, 2011. "Public Debt Stabilization: Redistributive Delays Versus Preemptive Anticipations," GEE Papers 0045, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Dec 2011.
  2. Hannes Andréasson & Niklas Elert & Nils Karlson, 2013. "Does Social Cohesion Really Promote Reforms?," WWWforEurope Working Papers series 33, WWWforEurope.
  3. Stijn Goeminne & Benny Geys & Carine Smolders, 2008. "Political fragmentation and projected tax revenues: evidence from Flemish municipalities," International Tax and Public Finance, Springer, vol. 15(3), pages 297-315, June.
  4. Kentaro Katayama, 2008. "Delay in Fiscal Reform," Microeconomics Working Papers 23075, East Asian Bureau of Economic Research.
  5. Grier, Kevin & Lin, Shu, 2009. "Speculative attacks and defenses as wars of attrition," European Journal of Political Economy, Elsevier, vol. 25(4), pages 540-546, December.

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