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Some Lessons from Transaction-Cost Politics for Less-Developed Countries

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  • Avinash Dixit

    () (Princeton University)

Abstract

Transaction-cost politics views economic policy-making as a political process constrained by asymmetric information and limited commitment possibilities. This paper examines some implications of this perspective for less-developed countries (LDCs) considering policy reform. It emphasizes that success requires reform of the rules and institutions which govern the strategic interaction of the participants in the political game, and that reforms must cope with the special interests and asymmetric information which already exist. In this light, it examines some broad issues of the design of constitutions and institutions (definition and enforcement of property rights, control of inflation, and of government expenditures, federalism, and redistribution), as well as some specific issue of the design of organizations and incentives (problems posed by the interaction of multiple tasks and multiple interests, and their interaction with the limitations on auditing and administration that exists in many LDCs). Copyright Blackwell Publishing Ltd 2003.

Suggested Citation

  • Avinash Dixit, 2003. "Some Lessons from Transaction-Cost Politics for Less-Developed Countries," Economics and Politics, Wiley Blackwell, vol. 15(2), pages 107-133, July.
  • Handle: RePEc:bla:ecopol:v:15:y:2003:i:2:p:107-133
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    Cited by:

    1. Miguel Rivera-Santos & Carlos Rufín, 2010. "Odd Couples: Understanding the Governance of Firm–NGO Alliances," Journal of Business Ethics, Springer, vol. 94(1), pages 55-70, July.
    2. Murshed, S. Mansoob, 2008. "On the Non-Contractual Nature of Donor-Recipient Interaction in Development Assistance," WIDER Working Paper Series 071, World Institute for Development Economic Research (UNU-WIDER).
    3. Alex Mourmouras & Wolfgang Mayer, 2009. "International Financial Assistance: A Loan Mechanism-Design Approach," Economics and Politics, Wiley Blackwell, vol. 21(1), pages 126-158, March.
    4. Azuero, Francisco & Guzmán, Alexander & Trujillo, María Andréa, 2011. "Contratos de Estabilidad Jurídica en Colombia (CEJ): ¿información asimétrica, inconsistencia intertemporal o captura de la autoridad tributaria?," Galeras. Working Papers Series 031, Universidad de Los Andes. Facultad de Administración. School of Management.
    5. Mariano Tommasi, 2006. "The Institutional Foundations of Public Policy," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Spring 20), pages 1-36, January.
    6. Hans Pitlik, 2004. "Institutionelle Voraussetzungen marktorientierter Reformen der Wirtschaftspolitik," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 240/2004, Department of Economics, University of Hohenheim, Germany.
    7. Leoni, Patrick & Luchini, Stéphane, 2011. "Designing the financial tools to promote universal access to AIDS care," Journal of Health Economics, Elsevier, vol. 30(1), pages 181-188, January.
    8. Mike, Károly, 2016. "Merre vezessen a magyar kapitalizmus útja?. Látkép Ronald Coase világítótornyából
      [Which course for Hungary s capitalism?. A view from Ronald Coase s lighthouse]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 597-614.
    9. Antonio Estache & Liam Wren-Lewis, 2009. "Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 729-770, September.
    10. Patibandla, Murali, 2001. "Pattern of Foreign Direct Investment in Emerging Economies: An Exploration," Working Papers 1-2001, Copenhagen Business School, Department of International Economics and Management.
    11. Carro Fernandez, Martha, 2007. "Welcoming Foreign Direct Investment? A Political Economy Approach to FDI Policies in Argentina and Brazil," MPRA Paper 47252, University Library of Munich, Germany.
    12. Edward B. Barbier, 2013. "Is a global crisis required to prevent climate change? A historical–institutional perspective," Chapters,in: Handbook on Energy and Climate Change, chapter 28, pages 598-614 Edward Elgar Publishing.
    13. Brugere, C., 2006. "Can integrated coastal management solve agriculture, fisheries, aquaculture conflicts at the land-water interface?: a perspective from new institutional economics," IWMI Books, Reports H039121, International Water Management Institute.
    14. Dani Rodrik, 2000. "Participatory Politics, Social Cooperation, and Economic Stability," American Economic Review, American Economic Association, vol. 90(2), pages 140-144, May.
    15. Cooter, Robert D., 2005. "Law, Information, and the Poverty of Nations," Berkeley Olin Program in Law & Economics, Working Paper Series qt4hd374nq, Berkeley Olin Program in Law & Economics.
    16. Cooter, Robert D, 2005. "Innovation, Information, and the Poverty of Nations," Berkeley Olin Program in Law & Economics, Working Paper Series qt9sz547bd, Berkeley Olin Program in Law & Economics.
    17. S. Mansoob Murshed, 2009. "On the Non-Contractual Nature of Donor-Recipient Interaction in Development Assistance," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 416-428, August.

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