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Reform Paths and Institutional Resilience

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  • Buchen, Clemens

Abstract

Broadly speaking, institutional reformers decide about the sequencing of types of reforms, either addressing institutional quality or macroeconomic stability. This paper develops a dynamic population game, in which agents play a simple anonymous-exchange game of cooperating or defecting. Agents switch to the strategy with higher expected payoff. Reformers can affect the payoff structure of the stage game in order to maximize the number of cooperators in the population by either enacting legal reform (rule of law) or focusing on the macro outlook of the economy facilitating cooperation. Reform is cumulative and starts from initial conditions. Reform effort per period of time is capped. On the basis of the theoretical model the paper makes predictions under which conditions which types of reforms should be enacted first and under which conditions reform will not be successful. In addition, the notion of institutional resilience is introduced as a minimum threshold of legal quality, which allows the population to better withstand exogenous shocks.

Suggested Citation

  • Buchen, Clemens, 2021. "Reform Paths and Institutional Resilience," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242422, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc21:242422
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    File URL: https://www.econstor.eu/bitstream/10419/242422/1/vfs-2021-pid-50255.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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