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Reform from Within

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  • Aaron Tornell

Abstract

We present a model of endogenous institutional change that rationalizes reforms that have taken place in the context of economic crisis and drastic political change. Most of the reforms have been initiated by powerholders, even though they have ended worse off relative to the status quo. The first point we make is that reform is the tool used by some powerful groups to limit the power of their political opponents. The second point is that groups with common access' to the economy's resources find it individually rational to overappropriate resources. As a result the economy deteriorates. When the economy reaches a crisis conflict among groups erupts. Reform is the result of this conflict.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6497.

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Date of creation: Apr 1998
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Handle: RePEc:nbr:nberwo:6497

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  1. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, American Economic Association, vol. 81(4), pages 912-21, September.
  2. Lawrence J. Lau & Yingyi Qian & Gerard Roland, 1997. "Reform without Losers: An Interpretation of China's Dual-Track Approach to Transition," Working Papers, Stanford University, Department of Economics 97048, Stanford University, Department of Economics.
  3. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  4. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  5. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 81(5), pages 1146-55, December.
  6. Aaron Tornell & Gerardo Esquivel, 1995. "The Political Economy of Mexico's Entry to NAFTA," NBER Working Papers 5322, National Bureau of Economic Research, Inc.
  7. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
  8. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(6), pages 1208-31, December.
  9. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  10. Grossman, Herschel I, 1994. "Production, Appropriation, and Land Reform," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 705-12, June.
  11. Richard J. Gilbert & Richard G. Harris, 1984. "Competition with Lumpy Investment," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 197-212, Summer.
  12. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 52(3), pages 383-401, July.
  13. Dewatripont, M & Roland, G, 1992. "Economic Reform and Dynamic Political Constraints," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(4), pages 703-30, October.
  14. Aaron Tornell, 1995. "Are Economic Crises Necessary for Trade Liberalization and Fiscal Reform? The Mexican Experience," NBER Chapters, in: Reform, Recovery, and Growth: Latin America and the Middle East, pages 53-76 National Bureau of Economic Research, Inc.
  15. Benhabib, Jess & Radner, Roy, 1992. "The Joint Exploitation of a Productive Asset: A Game-Theoretic Approach," Economic Theory, Springer, Springer, vol. 2(2), pages 155-90, April.
  16. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, American Economic Association, vol. 76(3), pages 390-407, June.
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