The Dynamics of Political Suppport for Reform in Economies in Transition
This paper considers a simple model of economic transition to analyse the dynamics of preferences over economic policy. I consider an economy with two sectors: a high-productivity private sector, which initially employs a small share of the economy's work-force, and a low-productivity state sector, where the majority of the population is employed at the outset. In the early stages of the transition, the private sector expands at a rate that is lower than the rate at which the state sector is contracting, with the result that unemployment first rises and then falls. The government's policy consists of a subsidy to the state sector, which has the effect of slowing down the transition. The analysis focuses on the dynamic evolution of workers' preferences over the level of the subsidy. A worker in the private sector always prefers the lowest possible subsidy to the state sector. The same is true of an unemployed worker as well, as the subsidy only reduces the number of new jobs created without reducing the number of job seekers. But state-sector workers have ambiguous feelings over reform strategy and their preferences change over time. In particular, even if state-sector workers prefer shock therapy at the outset, they will always want to slow the reforms down at a later stage. The reason is that the probability of finding a higher-paying private-sector job declines as the transition unfolds.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 9 (1995)
Issue (Month): 4 (December)
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/622903|
When requesting a correction, please mention this item's handle: RePEc:eee:jjieco:v:9:y:1995:i:4:p:403-425. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.