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The political economy of Maduro’s economic policies

Rodriguez, Francisco (2020): The political economy of Maduro’s economic policies.

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Abstract

This paper provides a political economy explanation for Venezuela's suboptimal macroeconomic policy choices during the Nicolás Maduro administration. Venezuela’s political system, embodied in the 1999 Constitution, dramatically increased the stakes of power, raising both the benefits of being in power and the costs of leaving office. It also significantly increased the frequency with which elections were held, exposing the government to a near-permanent state of electoral exposure. The combination of high stakes of power and high electoral exposure raised the incentives for policymakers to focus on the short-term effects of policies and disregard their long-term consequences. We explain why this mix proved toxic when the economy was hit with a large negative shock that required it to implement adjustments with significant near-term costs.

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