Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7356897 | Journal of Comparative Economics | 2018 | 9 Pages |
Abstract
When countries need to implement costly economic policy reforms, these often imply uncertainties about their effectiveness for the home country and their spillovers to other countries. We develop a model to show that under these circumstances countries implement too few or too many policy reforms. From a social perspective, too many reforms follow if the spillover effects of reforms become sufficiently uncertain. Since centralization of policies to correct inefficient policies is often not possible, we look for alternative instruments that can restore the efficient level of reforms. We compare subsidizing reform efforts with insuring against bad outcomes, and argue that subsidies are advantageous in terms of requiring less information for implementation.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Carsten Hefeker, Michael Neugart,