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When Are Stabilizations Delayed? Alesina-Drazen Revisited

Listed author(s):
  • Cesar Martinelli

    ()

    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

  • Raul Escorza

    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

In an influential article, Alesina and Drazen (1991) model delay of stabilization as the result of a struggle between political groups supporting reform plans with different distributional implications. In this paper we show that ex ante asymmetries in the costs of delay for the groups will reduce the probability of conflict and will lead to a shorter expected delay. Accurate common information about the cost of delay may lead to no delay at all. In an asymmetric conflict, a wider divergence in the distributional implications of reform will reduce the probability of conflict but will lead to a longer expected delay.

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File URL: http://ftp.itam.mx/pub/academico/inves/martinelli/04-08.pdf
File Function: First version, 2004
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Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0408.

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Length: 28 pages
Date of creation: Jun 2004
Handle: RePEc:cie:wpaper:0408
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  1. Andrés Erosa & Gustavo Ventura, 2000. "On Inflation as a Regressive Consumption Tax," UWO Department of Economics Working Papers 20001, University of Western Ontario, Department of Economics.
  2. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Thaicharoen, Yunyong, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," CEPR Discussion Papers 3575, C.E.P.R. Discussion Papers.
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  5. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  6. Paul Klemperer & Jeremy Bulow, 1999. "The Generalized War of Attrition," American Economic Review, American Economic Association, vol. 89(1), pages 175-189, March.
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  18. 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.
  19. Allan Drazen & Vittorio Grilli, 1990. "The Benefits of Crises for Economic Reforms," NBER Working Papers 3527, National Bureau of Economic Research, Inc.
  20. Alberto Alesina & Roberto Perotti, 1994. "The Political Economy of Budget Deficits," NBER Working Papers 4637, National Bureau of Economic Research, Inc.
  21. Raul Labán & Federico Sturzenegger, 1994. "Distributional Conflict, Financial Adaptation And Delayed Stabilizations," Economics and Politics, Wiley Blackwell, vol. 6(3), pages 257-276, November.
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  23. Kockesen, L. & Ok, E., 1999. "Strategic Delegation by Unobservable Incentive Contracts," Working Papers 99-11, C.V. Starr Center for Applied Economics, New York University.
  24. Perraudin, William & Sibert, Anne, 2000. "The Timing of Multilateral Lending," Economic Journal, Royal Economic Society, vol. 110(460), pages 192-211, January.
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