The Impact of Politics in Policy Reforms

S.A.R, Tharanga (2018): The Impact of Politics in Policy Reforms.

Abstract

1. Abstract The economic policy reforms play an important role to increase the economic growth of the countries. The economic policy reforms can perform in both national and sectoral levels. There are two main types of economic reforms at national level including stabilisation policies and structural adjustments policies. In addition to that, economic policy reforms may happen in any sector like agriculture, industry and trade. Due to economic reforms create the distributional effects in the society, it creates both losers and winners, in addition to producing of delayed outcomes. This distributional effect might create a political volatility in the society. Therefore, political authorities are indifferent between the self-interest and uncertainty of their tenure of the office in next period. If the country suffers from political instability, the risk of losing the power of existing government is high and then, the policy reforms will be delayed. In addition to that, the literature highlights the importance of government credibility for the successful economic reforms. Some governments support for the redistribution policies, and some are not. It is entirely depended on the ideological polarisation. Therefore, for the successful policy changes, formulation of politically sound economic policies and timely implementation of those policies are essential.

• Item Type: MPRA Paper
• Language: English
• Keywords: economic policy reforms, redistribution, political stability
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development

References

Acemoglu, D., Johnson, S., Querubin, P., & Robinson, J.A. (2008). When Does Policy Reform Work? The Case of Central Bank Independence. Brooking Papers on Economic Activity. 2008. 351-417.

Acemoglu, D., & Robinson, J.A. (2013). Economics versus Politics: Pitfalls of Policy Advice. NBER Working Paper No. 18921.

Adam , R.H. (2000). The Politics of Economic Policy Reforms in Developing Countries. Policy Research Working Paper no.2443: World Bank.

Agnello,L.,Castro,V.,Jalles,J.T., & Sousa,R.M.(2015). What determines the likelihood of structural reforms?.European Journal of Political Economy.37.129-145.

Alisina, A., & Drazen, A. (1991). Why Are Stabilizations Delayed?. American Economic Review. 81(5). 1170-1188. Alisina, A., & Rodrik,D. (1994).Distributive Politics and Economic Growth. Quarterly Journal of Economics. 109(2).465-490.

Alisina, A., & Tabellini, G. (1989). External Debt, Capital Flight and Political Risk. NBER Working Paper No.2610: Cambridge.

Clark, G.R.G. (1995). More Evidence on Income Distribution and Growth. Journal of Development Economics. 47.403-427.

Cukierman,A., Edward,S., & Tabellini,G. (1992). Siegniorage and Political Instability. American Economic Review. 82(3). 537-555.

Drezen, A., & Grilli, V. (1993). The Benefits of Crises for Economic Reforms. American Economic Reform. 83(3). 598-607.

Easterly, W. (2003). IMF and World Bank Structural Adjustment Programs and Poverty. The Managing Currency Crises in Emerging Markets. Edited by Michael P. Dooley and Jeffrey A. Frankel, University Press of Chicago.

Gordon, D.F.(1996). Sustaining Economic Reform under Political Liberalization in Africa: Issues and Implications. World Development. 24(9).1527-1537.

Herbst, J. (1990). The Structural Adjustments of Politics in Africa. World Development. 18(7). 949-958.

Jong-A-Pin,R., & De Haan, J.,(2007). Political regime change, economic reform and growth accelerations. CESifo conference center: Munich.

Marangos, J. (2005). A Political Economy Approach to the Neoclassical Gradualist Model of Transition. Journal of Economic Surveys. 19(2).263-293.

Newell, R. (2011). Political Economy of Reform in Mexico (Richard Snape Lecture, 11 October 2011, Melbourne). Productivity Commission:Australia.

Pederson,K.R. (1997). The Political Economy of Distribution in Developing Countries: A Rent-Seeking Approach. Public Choice. 91(3/4).351-373.

Persson, T., & Tabellini, G. (1994). Is Inequality Harmful for Growth?. American Economic Review. 84(3).600-621.

Rodrik, D. (1992). The rush to free trade in the developing world: why so Late? Why now? Will It last?. NBER Working Paper No.3947: Cambridge.

Rodrik,D.(1996).Understanding economic policy reform. Journal of economic literature. 34(1).9-41. Rodrik,D., Grossman, G., & Norman, V. (1995). Getting Interventions Rights: How South Korea and Taiwan Grew Rich?. Economic Policy.10(20). 53-107.

The World Bank. (2008). The political economy of policy reforms: Issues and implications for policy dialogues. The World Bank.

The World Bank. (2006). Equity and Development. The World Bank.