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Disagreement and Learning About Reforms

Listed author(s):
  • Binswanger, J.

    (Tilburg University, Center For Economic Research)

  • Oechslin, M.

    (Tilburg University, Center For Economic Research)

Abstract: When it comes to economic reforms in developing countries, many economists agree on broad objectives (such as fostering outward orientation). Broad objectives, however, can be pursued in many di¤erent ways, and policy experimentation is often indispensable for learning which alternative works locally. We propose a simple model to study this societal learning process. The model explores the role of disagreeing beliefs about “what works”. It suggests that this type of disagreement can stall the societal learning process and cause economic stagnation. Interestingly, this can happen even if everybody knows that Pareto-improving reforms do exist. Our analysis is motivated by the empirical observation of a negative relationship between disagreement and economic growth among poorer countries.

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File URL: https://pure.uvt.nl/portal/files/1580760/2014-020.pdf
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2014-020.

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Date of creation: 2014
Handle: RePEc:tiu:tiucen:bb4785e9-74c3-46ff-bdab-d3a3a5687396
Contact details of provider: Web page: http://center.uvt.nl

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