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Reform from Within

  • Aaron Tornell

We present a model of endogenous institutional change that rationalizes reforms that have taken place in the context of economic crisis and drastic political change. Most of the reforms have been initiated by powerholders, even though they have ended worse off relative to the status quo. The first point we make is that reform is the tool used by some powerful groups to limit the power of their political opponents. The second point is that groups with common access' to the economy's resources find it individually rational to overappropriate resources. As a result the economy deteriorates. When the economy reaches a crisis conflict among groups erupts. Reform is the result of this conflict.

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File URL: http://www.nber.org/papers/w6497.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6497.

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Date of creation: Apr 1998
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Handle: RePEc:nbr:nberwo:6497
Note: IFM
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  1. 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 1146-55, December.
  2. Lau, Lawrence J & Qian, Yingyi & Roland, Gérard, 1998. "Reform Without Losers: An Interpretation of China's Dual-Track Approach to Transition," CEPR Discussion Papers 1798, C.E.P.R. Discussion Papers.
  3. Aaron Tornell & Gerardo Esquivel Hernández, 1997. "The Political Economy of Mexico's Entry into NAFTA," NBER Chapters, in: Regionalism versus Multilateral Trade Arrangements, NBER-EASE Volume 6, pages 25-56 National Bureau of Economic Research, Inc.
  4. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
  5. Grossman, Herschel I, 1994. "Production, Appropriation, and Land Reform," American Economic Review, American Economic Association, vol. 84(3), pages 705-12, June.
  6. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  7. Gilbert, Richard & Harris, Richard G., 1984. "Competition with Lumpy Investment," Department of Economics, Working Paper Series qt11v5q20z, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  8. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
  9. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  10. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December.
  11. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 383-401, July.
  12. Mathias Dewatripont, 1992. "Economic Reform and Dynamic Political Constraints," ULB Institutional Repository 2013/175991, ULB -- Universite Libre de Bruxelles.
  13. Aaron Tornell, 1995. "Are Economic Crises Necessary for Trade Liberalization and Fiscal Reform? The Mexican Experience," NBER Chapters, in: Reform, Recovery, and Growth: Latin America and the Middle East, pages 53-76 National Bureau of Economic Research, Inc.
  14. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September.
  15. Benhabib, Jess & Radner, Roy, 1992. "The Joint Exploitation of a Productive Asset: A Game-Theoretic Approach," Economic Theory, Springer, vol. 2(2), pages 155-90, April.
  16. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
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