Explaining Reform Deadlocks
Countries are often slow to adjust their economic structures to new necessities although this reform reluctance is costly in terms of growth and employment. This paper analyses the relevant factors that block or foster economic reforms. Theoretical considerations show that there are at least three classes of potentially relevant factors: the objective need for reforms, political-economic issues and factors associated with limited rationality or rational ignorance. In the empirical analysis, a reform event is quantified as a significant change of the Economic Freedom of the World indicator within a five-year-period. This allows to run probit estimations for a large country panel starting in the 1970s where the probability of reform is explained by a number of proxies covering all three classes of potential factors. The results suggest that the initial extent of economic freedom and growth performance are empirically relevant factors. Furthermore, countries with an ageing population appear to behave less reform friendly.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.zew.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alesina, Alberto & Drazen, Allan, 1991.
"Why Are Stabilizations Delayed?,"
American Economic Review,
American Economic Association, vol. 81(5), pages 1170-88, December.
- Caplan, Bryan, 2001. "Rational Ignorance versus Rational Irrationality," Kyklos, Wiley Blackwell, vol. 54(1), pages 3-26.
- Gwartney, James & Lawson, Robert, 2003. "The concept and measurement of economic freedom," European Journal of Political Economy, Elsevier, vol. 19(3), pages 405-430, September.
- Heinemann, Friedrich, 2000. "Die Psychologie irrationaler Wirtschaftspolitik am Beispiel des Reformstaus," ZEW Discussion Papers 00-12, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- 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.
- Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
- Caplan, Bryan, 2001. " Rational Irrationality and the Microfoundations of Political Failure," Public Choice, Springer, vol. 107(3-4), pages 311-31, June.
- de Haan, Jakob, 2003. "Economic freedom: editor's introduction," European Journal of Political Economy, Elsevier, vol. 19(3), pages 395-403, September.
When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:2035. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.