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The political economy of structural adjusment

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  • Claudio Sapelli

Abstract

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

Suggested Citation

  • Claudio Sapelli, 1993. "The political economy of structural adjusment," Estudios de Economia, University of Chile, Department of Economics, vol. 20(esp Year ), pages 141-156, june.
  • Handle: RePEc:udc:esteco:v:20:y:1993:i:esp:p:141-156
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    File URL: http://www.econ.uchile.cl/uploads/publicacion/a6662652-b212-4a59-b590-b2c3fc8aa673.pdf
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    Cited by:

    1. Claudio Sapelli, 2003. "The Political Economics of Import Substitution Industrialization," Documentos de Trabajo 257, Instituto de Economia. Pontificia Universidad Católica de Chile..

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