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Who adjusts and when? On the political economy of reforms

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Author Info
Alberto Alesina
Silvia Ardagna
Francesco Trebbi

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Abstract

Why do countries delay stabilizations of large and increasing budget deficits and inflation? And what explains the timing of reforms? We use the war of attrition model as a guidance for our empirical study on a vast sample of countries. We find that stabilizations are more likely to occur when time of crisis occur, at the beginning of term of office of a new government, in countries with "strong" governments, (i. e. presidential systems and unified governments with a large majority of the party in office), and when the executive faces less constraints. The role of external inducements like IMF programs has at best a weak effect, but problem of reverse causality are possible.

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Paper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 2108.

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Date of creation: 2006
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Handle: RePEc:fth:harver:2108

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alessandra Casella & Barry Eichengreen, 1994. "Can Foreign Aid Accelerate Stabilization?," NBER Working Papers 4694, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Gian Maria Milesi-Ferretti & Roberto Perotti & Massimo Rostagno, 2002. "Electoral Systems And Public Spending," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 609-657, May. [Downloadable!] (restricted)
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  3. Mariano Tommasi & Andrés Velasco, 1995. "Where Are We in the Political Economy of Reform?," Working Papers 11, Universidad de San Andres, Departamento de Economia, revised Apr 1996.
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  4. Persson, Torsten & Tabellini, Guido, 1997. "Political Economics and Macroeconomic Policy," CEPR Discussion Papers 1759, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Francisco José Veiga, 2000. "Delays of Inflation Stabilizations," Economics and Politics, Blackwell Publishing, vol. 12(3), pages 275-295, November. [Downloadable!] (restricted)
  6. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Alberto Alesina & Roberto Perotti & José Tavares, 1998. "The Political Economy of Fiscal Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998-1), pages 197-266. [Downloadable!]
  8. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October. [Downloadable!] (restricted)
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  9. Francesco Giavazzi & Tullio Jappelli & Marco Pagano & Marina Benedetti, 2005. "Searching for Non-Monotonic Effects of Fiscal Policy: New Evidence," CSEF Working Papers 142, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
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  10. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March. [Downloadable!] (restricted)
  11. Robert J. Barro & Jong-Wha Lee, 2002. "IMF Programs: Who is Chosen and What Are the Effects?," NBER Working Papers 8951, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May. [Downloadable!] (restricted)
  13. Tito Boeri, 2005. "Reforming Labor and Product Markets: Some Lessons from Two Decades of Experiments in Europe," IMF Working Papers 05/97, International Monetary Fund. [Downloadable!]
  14. Philippe Aghion & Alberto Alesina & Francesco Trebbi, 2004. "Endogenous Political Institutions," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 565-611, May. [Downloadable!] (restricted)
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  15. Hsieh, Chang-Tai, 2000. "Bargaining over reform," European Economic Review, Elsevier, vol. 44(9), pages 1659-1676, October. [Downloadable!] (restricted)
  16. Drazen, A. & Grilli, V., 1991. "The Benefits of Crisis for Economic Reforms," Papers 27-91, Tel Aviv.
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  17. Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661926.
  18. Alberto Alesina & Silvia Ardagna, 1998. "Tales of fiscal adjustment," Economic Policy, CEPR, CES, MSH, vol. 13(27), pages 487-545, October. [Downloadable!] (restricted)
  19. Bruno, Michael & Easterly, William, 1996. "Inflation's Children: Tales of Crises That Beget Reforms," American Economic Review, American Economic Association, vol. 86(2), pages 213-17, May. [Downloadable!] (restricted)
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  20. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank. [Downloadable!]
  21. Philippe Aghion & Alberto Alesina & Francesco Trebbi, 2005. "Choosing Electoral Rules: Theory and Evidence from US Cities," NBER Working Papers 11236, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  22. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," Economics Working Papers 0047, Institute for Advanced Study, School of Social Science. [Downloadable!]
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  23. A. Javier Hamann & Alessandro Prati, 2003. "Why Do Many Disinflations Fail? The Importance of Luck, Timing, and Political Institutions," IMF Working Papers 02/228, International Monetary Fund. [Downloadable!]
  24. Daron Acemoglu, 2005. "Constitutions, Politics and Economics: A Review Essay on Persson and Tabellini's "The Economic Effect of Constitutions"," NBER Working Papers 11235, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  25. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1367-1389, September. [Downloadable!] (restricted)
  26. Enrico Spolaore, 2004. "Adjustments in Different Government Systems," Economics and Politics, Blackwell Publishing, vol. 16(2), pages 117-146, 07. [Downloadable!] (restricted)
  27. Bliss, Christopher & Nalebuff, Barry, 1984. "Dragon-slaying and ballroom dancing: The private supply of a public good," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 1-12, November. [Downloadable!] (restricted)
  28. Juan Zalduendo & Jun Il Kim & Charalambos Christofides & Atish R. Ghosh & Uma Ramakrishnan & Alun H. Thomas & Laura Papi, 2005. "The Design of IMF-Supported Programs," IMF Occasional Papers 241, International Monetary Fund.
  29. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
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  30. Allan Drazen & William Easterly, 2001. "Do Crises Induce Reform? Simple Empirical Tests of Conventional Wisdom," Economics and Politics, Blackwell Publishing, vol. 13(2), pages 129-157, 07. [Downloadable!] (restricted)
  31. Ardagna, Silvia, 2004. "Fiscal stabilizations: When do they work and why," European Economic Review, Elsevier, vol. 48(5), pages 1047-1074, October. [Downloadable!] (restricted)
  32. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Holger Zemanek & Ansgar Belke & Gunther Schnabl, 2009. "Current Account Imbalances and Structural Adjustment in the Euro Area: How to Rebalance Competitiveness," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  2. Ashoka Mody & Stefania Fabrizio, 2008. "Breaking the Impediments to Budgetary Reforms: Evidence from Europe," IMF Working Papers 08/82, International Monetary Fund. [Downloadable!]
  3. Daniel Leigh & Alexander Plekhanov & Manmohan S. Kumar, 2007. "Fiscal Adjustments: Determinants and Macroeconomic Consequences," IMF Working Papers 07/178, International Monetary Fund. [Downloadable!]
  4. Lenka Šťastná, 2009. "Spatial Interdependence of Local Public Expenditures: Selected Evidence from the Czech Republic," AUCO Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 007-025, March. [Downloadable!]
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