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Learning about reform: Time-varying support for structural adjustment


  • Veldkamp, Laura


Political support for structural reforms can vary dramatically over time. Countries that have sustained reforms have seen their popularity grow, while others have witnessed sudden reversals of political support. Opinion can reverse itself, without any apparent provocation, when voters are learning about the effects of reform. In this model, structural adjustment causes a drop in government services and temporary unemployment. The unemployed gradually learn about when they will be re-employed. As labor markets adjust and the cost of reform is revealed, support can gradually rise, it can remain low and suddenly rise, or there can be a quick reversal of support for a previously popular policy. Cross-sectional data, event studies and case study support the explanation. Extensions consider international policies to maintain support for reform.

Suggested Citation

  • Veldkamp, Laura, 2009. "Learning about reform: Time-varying support for structural adjustment," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 192-206, March.
  • Handle: RePEc:eee:reveco:v:18:y:2009:i:2:p:192-206

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    References listed on IDEAS

    1. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-1187, December.
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    3. Aaron Tornell, 1998. "Reform from Within," NBER Working Papers 6497, National Bureau of Economic Research, Inc.
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    6. Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
    7. Sanjay Jain & Sharun W. Mukand, 2003. "Redistributive Promises and the Adoption of Economic Reform," American Economic Review, American Economic Association, vol. 93(1), pages 256-264, March.
    8. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
    9. Sebastian Edwards & Daniel Lederman, 1998. "The Political Economy of Unilateral Trade Liberalization: The Case of Chile," NBER Working Papers 6510, National Bureau of Economic Research, Inc.
    10. Ronald Findlay & Stanislaw Wellisz, 1982. "Endogenous Tariffs, the Political Economy of Trade Restrictions, and Welfare," NBER Chapters,in: Import Competition and Response, pages 223-244 National Bureau of Economic Research, Inc.
    11. Sebastian Edwards & Alejandra Cox Edwards, 2000. "Economic reforms and labour markets: policy issues and lessons from Chile," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 181-230, April.
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    Cited by:

    1. Sweder J. G. van Wijnbergen & Tim Willems, 2016. "Learning Dynamics and Support for Economic Reforms: Why Good News Can Be Bad," World Bank Economic Review, World Bank Group, vol. 30(1), pages 1-23.
    2. repec:oup:wbecrv:v:31:y:2017:i:2:p:329-350. is not listed on IDEAS
    3. Jain, Sanjay & Majumdar, Sumon, 2016. "State capacity, redistributive compensation and the political economy of economic policy reform," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 462-473.
    4. Oscar Calvo-Gonzalez & Barbara Cunha & Riccardo Trezzi, 2017. "When Winners Feel Like Losers: Evidence from an Energy Subsidy Reform," World Bank Economic Review, World Bank Group, vol. 31(2), pages 329-350.
    5. Sweder van Wijnbergen & Tim Willems, 2012. "Learning Dynamics and the Support for Economic Reforms: Why Good News can be Bad," Tinbergen Institute Discussion Papers 12-043/2, Tinbergen Institute.


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