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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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12049.

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Date of creation: Feb 2006
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Publication status: published as Alesina, Alberto, Silvia Ardagna, and Francesco Trebbi. “Who Adjusts and When? On the Political Economy of Stabilizations.” IMF Staff Papers, Mundell-Fleming Lecture, 53: 1-49, 2006 .
Handle: RePEc:nbr:nberwo:12049

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