6 may have special ties to veto players enabling them to influence these players, but they do not normally exercise veto power directly.) The political science literature suggests that the more veto players there are in a political system, the more credible and stable are its policies—but also the more difficult and time-consuming it is to initiate and pass reform.

One common finding: initiating reform appears to be easier in presidential than in parliamentary systems, but securing approval can be time-consuming. The reason is that presidential systems typically grant the president formal agenda-setting powers, including the right to initiate reform by executive decree. Presidential authority seems to have been important in initiating regulatory reforms in such countries as the Republic of Korea and Mexico.<sup>6</sup> But presidential systems may also be less effective at generating decisions because they have another veto point: unlike in parliamentary systems, the executive and the legislature are independently elected and may be of different political parties. Tensions between the executive and the legislature help explain why, for example, many Latin American countries with presidential systems found it difficult to agree on labor market reforms during the 1990s. In Colombia, labor reform that first appeared on the agenda in 1999 took nearly four years, several working drafts, and two failed attempts to achieve legislative approval in 2002 (we discuss this example in greater detail in Section II below).

# _Political competition and incentives_

A third strand of analysis focuses on the dynamics of political competition and the extent to which it provides incentives for politicians to reform.<sup>7</sup> In democratic countries elections allow voters to express their political opinions and hold politicians accountable for results. But their role may be undermined by political market imperfections. One such imperfection is the lack of information, which makes it difficult for voters to judge the performance of individual politicians. Even in developed countries politicians can evade electoral punishment through obfuscation, particularly when they control media outlets, or by spending public money on highly visible but socially worthless projects, or by targeting narrow voter groups at the expense of the majority. These problems are compounded in developing countries where literacy and press freedoms are generally lower. They are also more pronounced in countries with greater social polarization— where voters may value politicians’ ethnic identity or other attributes over their performance and where politicians make promises to these groups at the expense of wider benefits—and in countries where patronage and clientelistic politics predominate. The lack of competition between political parties and the short time horizon of politicians can be further disincentives to deal with reforms with long-term benefits and payoffs.

> 6 As the Organisation for Economic Co-operation and Development (OECD 2002, p. 87) puts it, “More so than most parliamentary systems, presidential systems have the capacity for cross-cutting, top-down policy reforms.”

> 7 This discussion is drawn from Keefer and Khemani (2005) who examine the role of political competition in understanding political incentives for providing public services.