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Who adjusts and when? On the political economy of reforms

  • Alberto Alesina
  • Silvia Ardagna
  • Francesco Trebbi

Why do countries delay stabilizations of large and increasing budget deficits and inflation? And what explains the timing of reforms? We use the war of attrition model as a guidance for our empirical study on a vast sample of countries. We find that stabilizations are more likely to occur when time of crisis occur, at the beginning of term of office of a new government, in countries with "strong" governments, (i. e. presidential systems and unified governments with a large majority of the party in office), and when the executive faces less constraints. The role of external inducements like IMF programs has at best a weak effect, but problem of reverse causality are possible.

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File URL: http://www.economics.harvard.edu/pub/hier/2006/HIER2108.pdf
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Paper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 2108.

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Date of creation: 2006
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Handle: RePEc:fth:harver:2108
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