capitalization of government support in agricultural land prices what do we know abstract the objective of this paper is to provide an overview of existing literature both theoretically and empirically on the extent to which agricultural subsidies do translate into higher land values and rents and finally benefit landowners instead of agricultural producers our review shows that agricultural support policy instruments contribute to increasing the rental price of farmland and that the extent of this increase closely depends on the level of the supply price elasticity of farmland relative to those of other factors inputs on the one hand and on the range of the possibilities of factor input substitution in agricultural production on the other hand the empirical literature shows that land prices and rents have in general a significant positive and inelastic response to government support such inelastic response is thought to reflect the uncertain future of the farm programmes and in general studies have indicated that land prices are more responsive to government based returns than to market based returns

why is china different from eastern europe perspectives from organization theory we draw from recent work in organization theory to explain the differences in reform strategies between china and eastern europe an experimentation approach was adopted in china whereas a big bang approach was more favored in eastern europe the explanation is based on differences in the organizational structure of central planning u form in eastern europe and m form in china the m form is more flexible because it makes local experiments possible contrary to the u form where this would give rise to major complications in coordination

distributive leakages of agricultural support some empirical evidence abstract the paper evaluates the transfer efficiency of the austrian bread grain policy taking into account distributive leakages i e how much of the transfers officially intended to support farm income are finally realised in the upstream and downstream industries gardner s am j agric econ 65 1983 225 well known measure of average transfer efficiency ate is augmented for the case of more than two social groups and computer intensive simulation procedures are utilised to deal with parameter uncertainty

testing the efficient redistribution hypothesis an application to japanese beef policy we discuss and model the structure of the political economy of japanese beef markets and we apply bullock s statistical test of the efficient redistribution hypothesis to our model to study the pareto efficiency of japanese beef policy in 1990 and 1991 we found that under the hypothesis that our modeled political economy adequately reflects the true japanese beef political economy we could not reject at the 5 significance level that japanese beef policy was inefficient in 1990 and in 1991 however we could reject inefficiency in 1991 at a 7 level of significance

promotion of the agricultural sector and political power in austria in most industrialized countries farmers as a small and well orgnized group are ableto influence government decisions to get rent creating proposals enacted two different viewsare presented to explain why the chicagoan view efficient redistribution hypothesis and the virginian view inefficient outcome of political bargaining a vertically structuredempirical model of the austrian farm sector is employed to test both hypotheses quantitativeresults of the welfare transfers from consumers taxpayers to farmers and agribusiness firmsare derived and the political weights of these groups are presented

heterogeneous effects of competitiveness shocks on macroeconomic performance across euro area countries this paper considers how competitiveness impacts macroeconomic performance in 11 euro area countries var models are estimated for the individual countries using quarterly data from 1995q4 to 2013q4 besides unit labour costs as a competitiveness measure the models include gdp the current account balance and domestic credit the empirical analyses show that changes in unit labour costs help explain gdp dynamics in the short and medium term in most countries whereas they have little explanatory power for the current account balance or domestic credit for most countries overall the effects of the unit labour costs vary substantially across the countries in the euro area the heterogeneity suggests that policy measures aiming to improve economic growth correct current account imbalances and ensure financial stability need to take country specific features into account

divided we reform evidence from us welfare policies abstract divided government is often thought of as causing legislative deadlock i investigate the link between divided government and economic reforms using a novel data set on welfare reforms in us states between 1978 and 2010 panel data regressions show that under divided government a us state is around 25 more likely to adopt a welfare reform than under unified government several robustness checks confirm this counter intuitive finding case study evidence suggests an explanation based on policy competition between governor senate and house

measuring the social costs of suboptimal combinations of policy instruments a general framework and an example abstract since most agricultural programs employ two or more policy instruments simultaneously it is notable that little research has attempted to find optimal instrument combinations and no research exists which evaluates the social costs unrealized benefits of combining instruments suboptimally in our paper we report a simple and feasible method to find optimal policy instrument combinations and we provide the first general formal approach to measuring the social costs of suboptimal policy instrument combinations our approach is illustrated in an analysis for five major u s crops corn feed grains wheat rice cotton the simple model we employ for the illustration suggests that except for the feed grains program the observed programs combined policy instruments quite suboptimally we conclude that agricultural economics research now can and should begin placing increased emphasis on studying optimal policy instrument combinations

financial liberalization and reversals political and economic determinants what accounts for the dynamics of financial reforms this paper identifies the political regime as one of the main factors focusing on democratization and financial reform it puts forward novel evidence for a u shaped relation across countries and over time for different reform measures and a wide range of estimators partial democracy is a main obstacle to financial reforms and democratization when incomplete may lead to severe financial reform reversals nauro f campos and fabrizio coricelli

international organizations and the political economy of reforms abstract we develop a simple dynamic model of policy reform that captures some of the determinants that underlie the differences between the reform paths taken by a number of countries since the early 1990s the model focuses on the interaction between domestic institutions and international organizations that promote reform on the one hand and the political incentives for reversing reforms on the other at equilibrium there are three types of reform paths a country can undergo a full scale lasting reform can carry out a partial but lasting reform or can go through cycles of reforms and costly counter reforms domestic institutions along with the incentives provided by international organizations determine the equilibrium path a politically myopic international organization may induce cycles of reforms and costly counter reforms thereby reducing the country s well being an international organization that only provides funds to promote reforms may have a less beneficial effect than one that assists the country with fresh funds to defend reforms when there is a risk of reversal international funds that promote reforms can also influence domestic institutions for example due to the intervention of an international organization countries could have incentives to dismantle institutions that build up reversal cost and or do not fully build their fiscal capacity

holding on for too long an experimental study on inertia in entrepreneurs and non entrepreneurs disinvestment choices abstract disinvestment in the sense of project termination and liquidation of assets including the cession of a venture is an important realm of entrepreneurial decision making this study presents the results of an experimental investigation modeling the choice to disinvest as a dynamic problem of optimal stopping in which the patterns of decisions are analyzed with entrepreneurs and non entrepreneurs our experimental results reject the standard net present value approach as an account of observed behavior instead most individuals seem to understand the value of waiting their choices are weakly related to the disinvestment triggers derived from a formal optimal stopping benchmark consistent with real options reasoning we also observe a pronounced psychological inertia i e most individuals hold on to a losing project for even longer than real options reasoning would predict the study provides evidence for entrepreneurs and non entrepreneurs being quite similar in their behavior

the old theory of economic policy and the new institutionalism abstract in economics recent emphasis on institutions suggests new policy dimensions for the traditional theory of economic policy which originated with tinbergen and others at the time of the keynesian revolution the paper presents elements of the traditional view instruments targets and policy models and then considers new aspects of policy especially policy for structural change the discussion emphasizes the implications for institutional design of incomplete knowledge and endogenous politics both public and private actors rely on incomplete policy models and the models themselves can become intermediate targets of policy

compensations as signaling devices in the political economy of reforms we propose an explanation for why efficient reforms are not carried out when losers can block their implementation and compensations are feasible in our model a government tries to sequentially implement two efficient reforms by bargaining with interest groups the organization of interest groups is endogenous compensations are distortionary and different governments care differently about distortions governments use low compensations to discourage losers who just want to receive transfers from organizing this comes at the cost of reforms being blocked by interest groups with relatively high losses resulting in a bias against payment of compensations and the implementation of reforms

rent seeking in natural resource quota allocations this paper examines the incentives for rent seeking in the allocation of natural resource quotas to competing user groups by political bodies the political body has discretion in making the allocation and competing user groups rent seek to influence the allocation we investigate ways in which the governmental body can affect the behavior of the players by setting the ground rules for the competition a political body can affect an allocatively pareto efficient outcome by choosing an appropriate default pre rent seeking policy surprisingly an allocatively efficient default policy is unlikely to minimize social costs however winner take all default policies are likely to maximize not minimize rent seeking a competitive post allocation market reduces rent seeking but is not either itself or in combination with an efficient default policy capable of minimizing social costs however forcing winners in political redistributions to fully compensate losers both lowers the rent seeking levels relative to a potential compensation criterion and when used together with an efficient default policy is capable of obtaining the first best solution of an allocatively efficient allocation with zero rent seeking

on the deadweight cost of production requirements for geographically differentiated agricultural products this article investigates the welfare effects of alternate producer collusion schemes in a context where collusion is authorized in order to cover fixed costs using a linear equilibrium displacement model we find evidence that when the producer group is allowed to control quota levels an input quota policy entails a smaller absolute deadweight loss than an output quota policy this finding suggests that if producer groups are allowed to resort to production distorting instruments to limit output they will make production choices that are less costly for society than if they had been allowed to directly control output levels copyright 2008 oxford university press

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

divide et impera strategic underpricing in privatizations in several recent initial public offerings in privatization casesshares seemed to be severely underpriced in this paper weprovide a political economy explanation for this apparentunderpricing using a variant of grossmann and helpmann s 1996 model of special interest politics we demonstrate thatgovernments may raise their election chances by rationinginvestors because the resulting broader distribution of sharesmakes regulation that is favorable to the privatized firm morepopular somewhat surprisingly even revenues from theprivatization can be increased through rationing the model alsoexplains the common practice of bonus systems designed to preventinvestors from taking profits immediately

learning from the doers developing country lessons for advanced economy growth from 1980 to 1992 emerging and developing countries grew by 3 4 percent per year their annual rate of growth increased to 5 4 percent between 1993 and 2012 no such increase occurred for advanced nations whose average growth from 1980 to 2012 was roughly constant excluding the impact of the 2008 2009 recession developing nations turned themselves around by embracing discipline sustained commitment to a pragmatic and flexible growth strategy three illustrations of discipline through the lens of trade fiscal and debt reforms in the developing world offer relevant practical lessons for recovery in advanced economies and continued catch up growth in developing nations

inertial credit and opportunistic arrears in transition in a transition economy enterprise restructuring may exhibit a laffer curve response to tighter credit as a result of rational collective inertia in the presence of a rigid production structure unenforceable contracts and high adjustment costs a contraction in credit finance subtracts more liquidity than enterprises can generate internally because unrestructured firms are forced to extend trade credit to illiquid buyers an increase in their number increases the availability of forced supplier credit in turn increasing the attractiveness of inertial behavior as trade credit cannot be enforced a critical mass of trade and wage arrears causes pressure for a collective bailout thus validating inertial behavior even by reformable firms

selective intervention and internal hybrids interpreting and learning from the rise and decline of the oticon spaghetti organization infusing hierarchies with elements of market control has become a much used way of simultaneously increasing entrepreneurialism and motivation in firms however this paper argues that such internal hybrids particularly in their radical forms are inherently hard to successfully design and implement because of a fundamental incentive problem of establishing credible managerial commitments to not intervene in delegated decision making this theme is developed and illustrated using the case of the world leading hearing aids producer oticon in the beginning of the 1990s oticon became famous for its radical internal hybrid the spaghetti organization recent work has interpreted the spaghetti organization as a radical attempt to foster dynamic capabilities by organizational means neglecting however that about a decade later the spaghetti organization has given way to a more traditional matrix organization in contrast an organizational economics interpretation of oticon organizational changes is developed this lens suggests that a strong liability of the spaghetti organization was the above incentive problem frequent managerial meddling with delegated rights led to a severe loss of motivation and arguably caused the change to a more structured organization refutable implications are developed and the discussion is broadened to more general issues of economic organization

structural uncertainty and subsidy removal for economies in transition abstract economies in transition are faced with a high degree of structural uncertainty i e uncertainty about which it is possible to learn through experience we study structural uncertainty s effects on a subsidy removal program subsidy removal causes unemployment but yields fiscal benefits and facilitates private sector growth when the policymaker does not know the speed with which the private sector absorbs the unemployed he will be driven toward a more decisive and therefore more informative policy the model also rationalizes policy reversals and implies that irreversibility constraints and political instability dampen the learning effect making policy more gradualist

on the reversibility of structural reforms abstract what are the factors that explain reversals in the implementation of structural reforms our main hypothesis is that reversals in different reforms are driven by different factors this paper presents novel evidence showing that a fdi inflows reduce the likelihood of privatization reversals b worsened terms of trade increase the probability of external liberalization reversals and c labor strikes propel reversals in price liberalization

exiting a lawless state an earlier paper showed that an economy could be trapped in an equilibrium state in which the absence of the rule of law led to asset stripping and the prevalence of asset stripping led to the absence of a demand for the rule of law highlighting a coordination failure this paper looks more carefully at the dynamics of transition from a non rule of law state the paper identifies a commitment problem as the critical feature inhibiting the transition the inability under a rule of law to forgive theft this can lead to the perpetuation of the non rule of law state even when it might seem that the alternative is pareto improving

downsizing and job insecurity this article offers an explanation of why firms downsizing patterns may vary substantially in magnitude and timing taking the form of one time massive cuts waves of layoffs or zero layoff policies the key element of this theory is that workers expectations about their job security affect their on the job performance in a situation where firms face adverse shocks the productivity effect of job insecurity forces firms to balance laying off redundant workers and maintaining survivors commitment the cost of ensuring commitment differs between firms with different characteristics and determines whether workers are laid off all at once or in stages however if firms have private information about their future profits they may not lay off any workers in order to signal a bright future boosting worker s confidence jel j21 j23 d21 d82

the effect of work first job placements on the distribution of earnings an instrumental variable quantile regression approach government employment programs for low skilled workers typically emphasize rapid placement of participants into jobs of which many are temporary help jobs using data from detroit s welfare to work program and the chernozhukov hansen instrumental variables quantile regression method we find that neither direct hire nor temporary help job placements significantly affect the lower tail of the earnings distribution in the upper tail direct hire placements yield sizable earnings increases for over half of participants while temporary help placements yield significant earnings losses at higher quantiles our results cast doubt on the efficacy of employment programs exclusive focus on rapid job placement and their widespread reliance on temporary help placements

the political economy of transition the overriding importance of political constraints in the transition process has led to developments of the theory of the political economy of reform what are the main insights from that theory how does it reflect the transition reality what have we learned and what do we still need to learn the present article will attempt to answer those questions

in search of the holy grail policy convergence experimentation and economic performance we consider a model of policy choice in which appropriate policies depend on a country s own circumstances but the presence of a successful leader generates an informational externality and results in too little policy experimentation corrupt governments are reined in while honest governments are disciplined inefficiently our model yields distinct predictions about the patterns of policy imitation corruption and economic performance as a function of a country s location vis aa vis successful leaders in particular it predicts a u shaped pattern in economic performance as we move away from the leader in the relevant space of characteristics close neighbors should do very well distant countries moderately well on average with considerable variance and intermediate countries worst of all an empirical test with the experience of post socialist countries provides supportive results

least cost cheap food policies some implications of international food aid abstract many low income countries pursue cheap food policies in which consumers pay subsidized prices for bread rice and other staples this paper addresses the issue of why different governments select different food subsidy policies using multiple instruments rather than a simple across the board subsidy to provide consumers with access to cheap food it examines the optimal structure of cheap food policies in the context of a partial equilibrium model in which the country may be large in trade and is able to combine import subsidies or tariffs and output taxes or subsidies to transfer income to consumers through the market the model allows for a marginal opportunity cost of government revenues greater than one dollar in addition in the model food aid from overseas may be either given away to the consumer or given to the government for subsequent sale in the domestic market the results indicate that only by happenstance will a country choose to use a pure consumption subsidy or a pure import subsidy to transfer income to consumers in addition an increase in international food aid does not necessarily lead the government to reduce producer and consumer prices for a commodity

economic reform voting and local political intervention evidence from india abstract this paper uses the indian tariff reforms of the early nineties to estimate how voters hurt by economic reforms respond regions more hurt by the tariff reform increased their support for both the party that initiated their suffering and parties with similar preferences in favor of poverty centric policies this response is surprisingly sophisticated where voters did not simply punish incumbents for negative income shocks and correctly discounted initial anti reform stances by opposition parties that later turned out to be false furthermore the strength of this voting response varied with both geography and local political incentives suggesting that the economic effects of reforms might vary substantially in large and decentralized democracies

the design of reform packages under uncertainty the authors present a model of large scale economic reforms modeled on the transition process in eastern europe with aggregate and individual uncertainty concerning the outcome of reforms the government is assumed to choose the speed and sequencing of reforms the authors compare big bang strategies with gradualist reform packages they show that gradualist reform packages may be easier to get started optimal sequencing of reforms should aim at creating constituencies for further reforms and gradualism may generate a higher investment response because of a lower option value of waiting than would a big bang approach copyright 1995 by american economic association

institutions and performance in european labour markets taking a fresh look at evidence this paper presents a selective survey of the recent literature on labour market institutions and offers new empirical eu based evidence on the impact of labour market reforms on employment and labour market adjustment although the literature traditionally treats labour market institutions as exogenous attention shifted recently towards understanding the underlying causes of specific institutional arrangements as a consequence the literature highlights the great importance of an efficient policy design exploiting these interactions wisely and identifies general principles for achieving an efficient policy design at both macro and micro levels although empirical evidence does not show a major change in terms of intensity of labour market reform after the setting of the economic and monetary union and the creation of the euro the reforms aiming at strengthening the labour market attachment of vulnerable groups tend to have been successful both in raising their employment and increasing labour market adjustment

partial market liberalization and the efficiency of policy reform the case of the european dairy sector this article analyzes the efficiency of partial market liberalization and policy reform with an application to the european dairy sector in a second best world partial moves toward market liberalization are not always efficiency improving we develop a general equilibrium model to investigate the efficiency implications of discrete changes in government policy the analysis covers price and quantity instruments used in both domestic and trade policy we derive simple conditions under which partial market liberalization is efficiency improving we apply the approach to agricultural policy reform in the european dairy sector and identify market liberalization scenarios that are not efficiency improving

searching for good policies policymaking is hard policymakers typically have imperfect information about which policies produce which outcomes and they are left with little choice but to fumble their way through the policy space via a trial and error process this raises a question at the heart of democracy do democratic systems identify good policies to answer this question i introduce a novel model of policymaking in complex environments i show that good policies are often but not always found and i identify the possibility of policymaking getting stuck at outcomes that are arbitrarily bad notably policy stickiness occurs in the model even in the absence of institutional constraints this raises the question of how institutions and the political environment impact experimentation and learning i show how a simple political friction uncertainty over voter preferences interacts with political competition and policy uncertainty in a subtle way that surprisingly improves the quality of policymaking over time

u s farm policy and the volatility of commodity prices and farm revenues a dynamic three commodity rational expectations storage model is used to compare the impact of the federal agricultural improvement and reform fair act of 1996 with a free market policy and with pre fair policies results suggest that fair did not lead to significant increases in long run price volatility or revenue volatility the main impact of pre fair relative to the free market regime was to substitute government storage for private storage in a way that did little to support prices or to stabilize farm incomes results also indicate that u s grain market volatility in 1995 2000 was due to fundamental market forces and not to fair copyright 2002 oxford university press

judging agricultural policies a survey this survey provides a structured picture of 40 years of literature which uses welfare economic tools to judge agricultural policy challenges and developments of normative agricultural policy analysis are discussed in an easily accessible graphical framework it is shown how the literature has gone from examining a very small discrete set of simple policies to a much broader often continuous set of policies that combine policy instruments simultaneously the importance of the pareto criterion used to explore the limits of how government can affect welfare is revealed moreover given the importance of the objective of income redistribution in agricultural policy agricultural economists have often departed from the purely efficiency oriented tradition in economics it is shown that they have tried to incorporate equity considerations by either adding these criteria as constraints to the social welfare function or directly incorporating these criteria in the functional form of the social welfare function

price support acreage controls and efficient redistribution this study is concerned with the combination of target price and acreage controls as the two major mechanisms of farm policy acreage controls are shown to enhance the efficiency of redistribution under a target price program more specifically this study demonstrates that if the traditional cobb douglas production function is assumed acreage controls do not enhance the efficiency of target price programs in the process of redistributing income to the farm sector the study proves that if the elasticity of substitution between land and all other inputs is less than one then the income redistributional costs are likely to be reduced moreover by using an empirical estimate of the elasticity of substitution and farm data for the time period 1984 88 this study demonstrates that acreage control programs have drastically reduced the deadweight losses associated with income redistribution flowing from target price programs these results lend strong support to the public choice notion that politicians favo

priorities and sequencing in privatization evidence from czech firm panel data abstract while privatization of state owned enterprises has been one of the most important aspects of the economic transition from a centrally planned to a market system no transition economy has privatized all its firms simultaneously this raises the question of whether governments privatize firms strategically in this paper we examine the determinants of the sequencing of privatization to obtain testable predictions about the factors that may affect sequencing we investigate the following competing government objectives i maximizing efficiency through resource allocation ii maximizing public goodwill from the free transfers of shares to the public iii minimizing political costs iv maximizing efficiency through information gains and v maximizing privatization revenues next we use firm level data from the czech republic to test the competing predictions about the sequencing of privatization consistent with the hypotheses of a government priority on revenues and public goodwill we find strong evidence that more profitable firms were privatized first the sequencing of privatization is also consistent with maximizing efficiency through information gains our results indicate that many empirical studies of the effects of privatization on firm performance suffer from a selection bias

liberalization endogenous institutions and growth a comparative analysis of agricultural reforms in africa asia and europe thirty years ago a vast share of low and middle income countries was heavily state controlled the liberalizations of the 1980s and 1990s had greatly different effects on growth in countries in africa asia and europe a comparative framework is used to document these differences and a model is developed to formally analyze how liberalization affects production and income distribution when the institutions that govern production and exchange are also affected hypotheses are derived for how endogenous institutional adjustments affect the growth response to liberalization these insights motivate a series of explanations for the differences in performance across regions and commodities following liberalization

success and failure of reform insights from the transition of agriculture this paper analyzes the linkages between the reform strategies in transition countries and economic performance the authors focus on agriculture because of the sharpness of the policy changes fundamental differences among countries and relative simplicity of agricultural relationships the authors document post reform performance in the transition countries of asia and europe the authors show how a pricing reform and subsidy reductions b land rights reform and policies that affect farm restructuring and c the presence institutions that facilitate exchange either markets or market substitutes affect output and productivity the paper ends with general lessons on reforms and transition

disentangling the consequences of direct payment schemes in agriculture on fixed costs exit decisions and output this paper goes beyond orthodox considerations of direct payment effects on agricultural output by highlighting the role of subsidies in affecting individual producers ability to cover fixed costs and in distorting the volume of aggregate production and net trade by implicitly discouraging exits the theoretical model considers both taxpayer and consumer financed decoupled direct payment schemes and compares them to a coupled production subsidy in terms of possible producer responses to direct payments the paper proposes an analytical framework of production decision making in the presence of a stochastic distribution of fixed costs across representative farms the paper shows that decoupled payments in theory can have a larger effect on output than coupled payments the model explicitly recognizes three consequences of domestic support a induce exit or entry b bias production incentives to domestic markets and c cross subsidize export in global markets an empirical model of the u s wheat sector is developed to illustrate the relative potential impacts of coupled versus decoupled payments on output through the effects on a farmer s ability to cover fixed costs and hence exit decisions

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

the political economy of fiscal consolidations in the context of recent research in political economy this paper addresses the policy problem of fiscal consolidation in terms of three types of issues i the macroeconomic effects of alternative strategies to consolidate ii the institutional setups conducive to a consolidation and iii the best strategy for implementing a consolidation in order to maximize its political feasibility one methodological feature of this survey is an emphasis on policy feasibility one methodological feature of this survey is an emphasis on policy issues in order to bridge the gap between the level of abstraction of politico economic models of fiscal policy and the issues faced by a policymaker when attempting a fiscal consolidation

an incentive approach to land set aside programs abstract this paper is devoted to a theoretical analysis of policies aiming at reducing the supply of agricultural produce through contractual or mandatory land set aside the model relies on contract theory under adverse selection it allows us to evaluate the impact of asymmetric information about yields on the optimal price support policy and on land set aside specifically we analyze an optimal contractual policy consisting of a subsidy system which makes transfers dependent on the set aside area and a policy of mandatory land set aside applying uniformly to all farms and ignoring incentive constraints numerical simulations allow us to assess and compare the respective effects of these policies

what explains the success or failure of structural adjustment programs in the 1980s development assistance shifted largely from financing investments such as roads and dams to promoting policy reform this change came because of a growing awareness that developing countries were held back more by poor policies than by a lack of finance for investment after nearly 20 years experience with policy based or conditional lending there have now been many studies of adjustment lending most of which take a case study approach many conclude that policy based lending works if countries have decided on their own to reform the authors examine a database of 220 world bank supported reform programs to identify why adjustment programs succeed or fail they find that a few political economy variables can successfully predict the outcome of an adjustment loan 75 percent of the time variables under the world bank s control resources devoted to preparation and supervision or number of conditions have no relationship with an adjustment program s success or failure what development agencies must do then is select promising candidates for adjustment support when the candidates is a poor selection devoting more administrative resources or imposing more conditions will not increase the likelihood of successful reform to improve its success rate with adjustment lending the world bank must become more selective and do a better job of understanding which environments are promising for reform and which are not that is likely to lead to fewer adjustment loans unless there is a significant change in the number of promising reformers to become more effective at supporting policy reform the agency must be willing to accept that this may lead to smaller volumes of lending

learning dynamics and support for economic reforms why good news can be bad support for economic reforms has often shown puzzling dynamics many reforms that began successfully lost public support this paper shows that learning dynamics can rationalize this paradox because the process of revealing reform outcomes is an example of sampling without replacement this concept challenges the conventional wisdom that one should begin by revealing reform winners it may also lead to situations in which reforms that enjoy both ex ante and ex post majority support will still not come to completion the framework can be used to explain why gradual reforms worked well in china where successes in special economic zones facilitated further reform whereas this was much less the case for latin american and central and eastern european countries

reforms and confidence abstract we examine the choice of economic reforms when policymakers have present biased preferences and can choose to discard information maintain confidence to mitigate distortions from excess discounting the decisions of policymakers and firms are shown to be interdependent confident policymakers carry out welfare improving reforms more often which increases the probability that firms will invest in restructuring while policymakers in different countries can be equally irrational the consequences of bounded rationality are less severe in economies with beneficial initial conditions we also examine how present biased preferences influence the choice between big bang versus gradualist reform strategies our findings help explain differences in economic reform success in various countries