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More Groups, Cheaper Reforms?

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Abstract

The topic of reforms is hotly debated among politicians and researchers. There are many approaches to explore the origins of reform deadlocks and budget deficits. Central to all these approaches are the costs generated either by the Status Quo or by eliminating the Status Quo via a reform. Costs generated by the reform can be offset by the government using compensation payments. Crucial for a successful reform is to minimize these compensation costs. The task is rather complicated, as certain groups of individuals, such as countries, federal states or political parties are hard to separate. Against this background this paper shows that under a majority rule the compensation costs can be minimized via enacting fragmentation among the population.

Suggested Citation

  • Corinna Ahlfeld, 2008. "More Groups, Cheaper Reforms?," Departmental Discussion Papers 138, University of Goettingen, Department of Economics.
    • Handle: RePEc:got:vwldps:138
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    File URL: http://www2.vwl.wiso.uni-goettingen.de/departmentpaper/DP_138.pdf
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    More about this item

    Keywords

    Political Economy; Fragmentation Compensation Payments;

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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