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Conflicts, Interest Groups, and Politics in Structural Reforms

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  • Avi Ben-Bassat

Abstract

The present study is, to my knowledge, the first to examine the balance of power among all players influencing the adoption of structural reforms: politicians, regulators, and interest groups. Special attention is devoted to the effect of conflicts between regulators. Professional conflicts signal to politicians that there is a high level of risk in implementing a given reform, thereby weakening their confidence in it. Conflicts also benefit interest groups, increasing their effectiveness vis-à-vis politicians. Using a unique data set on 32 attempts to reform Israel's financial market, I find that the greater the extent of conflicts among regulators and the greater the intensity of the opposition of interest groups, the lower the probability that a reform will be approved. These conflicts, together with the strength of interest groups, have led to repeated attempts to introduce reforms, so that it takes, on average, 10 years for a reform to be adopted.

Suggested Citation

  • Avi Ben-Bassat, 2011. "Conflicts, Interest Groups, and Politics in Structural Reforms," Journal of Law and Economics, University of Chicago Press, vol. 54(4), pages 937-952.
  • Handle: RePEc:ucp:jlawec:doi:10.1086/658672
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