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Gradualism versus Big Bang: Evidence from Transition Countries

Author

Listed:
  • B. MERLEVEDE

    ()

  • K. SCHOORS

    ()

Abstract

This paper uses previous empirical work to simulate the impact on real economic growth of the big bang and gradualist approaches to reform. Uncertainty concerning the appropriate reform steps introduces the possibility of reform reversals. We find that higher expected probabilities of reversal make policymakers more likely to opt for gradualism. Even relatively small probabilities are su.cient to tilt the balance in favour of gradualism. This is reinforced by shortsightedness of policymakers that follows from standard political cycles, but may be moderated by voter myopia.

Suggested Citation

  • B. Merlevede & K. Schoors, 2004. "Gradualism versus Big Bang: Evidence from Transition Countries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/243, Ghent University, Faculty of Economics and Business Administration.
  • Handle: RePEc:rug:rugwps:04/243
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    File URL: http://wps-feb.ugent.be/Papers/wp_04_243.pdf
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    More about this item

    Keywords

    policy reform; gradualism; big bang;

    JEL classification:

    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

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