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Reform fatigue: symptoms, reasons, and implications

  • Eduardo Lora
  • Ugo Panizza
  • Myriam Quispe-Agnoli

Following a period of ambitious promarket reforms, Latin American policymakers and the public at large have entered a period of “reform fatigue.” Initial enthusiasm for policies such as liberalized markets and a level field for investors has given way more recently to the view that ambitious promarket reforms are to blame for the region’s economic crises. The process of reform has stalled in some countries, and a few have suffered serious setbacks. ; To help explore the future of reform, this article aims to document and explain the symptoms of fatigue among the public, policymakers, and opinion leaders. The authors explore the economic, social, political, and psychological reasons for the fatigue. They review numerous studies that have identified various explanatory factors, including reforms’ modest economic outcomes, the failure of reforms to improve social conditions, a leftward shift of public opinion and political coalitions, and perception biases among citizens. ; The authors find that economic reasons are the primary explanation for the increasing rejection of reforms. Disillusionment with reforms, despite reforms’ overall benefits, seems to stem from people’s inability to isolate short-term macroeconomic situations from reforms’ permanent effects. ; While political reasons cannot account for reform fatigue, the authors believe that politics will play a decisive role in the future of reform. They conclude that, especially in countries where promarket reforms are well advanced, eventual economic recoveries will result in further institutional and social policy reforms.

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Article provided by Federal Reserve Bank of Atlanta in its journal Economic Review.

Volume (Year): (2004)
Issue (Month): Q 2 ()
Pages: 1 - 28

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Handle: RePEc:fip:fedaer:y:2004:i:q2:p:1-28:n:v.89no.2
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