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The political economy of structural adjusment

  • Claudio Sapelli

This paper provides a model of utility maximizing governments to explain when and why countries adopt or discontinue a structural adjustment program (SAP), in an attempt to stabilize and liberalize their economies. Assuming a rent-seeking government, the model shows that compliance with an SAP is endogenous. Consequently, the key issue is to study the factors that affect the equilibrium rent-extracting rate. The paper identifies several incentives either to announce an SAP, though without implementing it, or to reverse one. These incentives are suggested as a possible explanation for the low investment rates observed in countries implementing SAPs. The paper also argues that the implementation of an SAP for a period of time long enough to bring about structural changes in the economy would, likewise, alter the equilibrium rent-extracting rate and would consolidate reforms. The paper also analyzes the negotiations between “technocrats” and “politicians” and their consequences on the type, quality and Journal: Estudios de Economia

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Article provided by University of Chile, Department of Economics in its journal Estudios de Economia.

Volume (Year): 20 (1993)
Issue (Month): esp Year 1993 (june)
Pages: 141-156

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Handle: RePEc:udc:esteco:v:20:y:1993:i:esp:p:141-156
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