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When are stabilizations delayed? Alesina-Drazen revisited

  • Martinelli, Cesar
  • Escorza, Raul

In an influential article, Alesina and Drazen (1991) model delay of stabilization as the result of a struggle between political groups supporting reform plans with different distributional implications. In this paper we show that ex ante asymmetries in the costs of delay for the groups will reduce the probability of conflict and will lead to a shorter expected delay. Accurate common information about the cost of delay may lead to no delay at all. In an asymmetric conflict, a wider divergence in the distributional implications of reform will reduce the probability of conflict but will lead to a longer expected delay.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 51 (2007)
Issue (Month): 5 (July)
Pages: 1223-1245

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Handle: RePEc:eee:eecrev:v:51:y:2007:i:5:p:1223-1245
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  19. Erosa, Andres & Ventura, Gustavo, 2002. "On inflation as a regressive consumption tax," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 761-795, May.
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