Evidence and Theory of Reforms

This chapter analyses reform over time across countries and sectors. Four scenarios for reforms are identified. In a scenario characterized by strong concentration of power in the hands of the policy-makers, a reform attempt in markets that do not feature entrenched interests may be carried out by exploiting this political power. Policy-makers lacking a substantial concentration of power can instead adopt a consensus building strategy to reform by tailoring the reform package to widen the political base. In the presence of strong entrenched interests, when some specific groups are both too strong to be confronted at once and too expensive to buy out, policy-makers may adopt a strategy of divide and conquer. In several circumstances, the reform efforts of policy-makers are largely affected by the existence of international laws or regulations that make reforms inescapable. Almost regardless of their political power and of the market or institution to be modified, the policy-maker may exploit these external constraints to carry out the reform.