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Who adjusts and when? On the political economy of reforms

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  • Alberto Alesina
  • Silvia Ardagna
  • Francesco Trebbi

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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