Political Economy Dimensions of Economic Policy Reform

Abstract

Assuming that the issues raised in the previous two chapters have been properly addressed and one has reliable measures and an accepted method of evaluating the impact of reforms, it remains difficult to establish why a set of reforms may appear to have failed. More generally, even if one has agreed criteria for establishing failure and success of reforms, there is still a problem in attributing causality. To allow us to focus on domestic politics, let us assume that external events have been controlled for, that the correct economic reforms were prescribed and that we can measure the degree of implementation. In such circumstances, observed failure of the reforms, in the sense that the expected improvements in economic outcomes have not occurred, can be attributed to incomplete implementation and/or inadequate responses (of agents to incentives, typically on the supply side). This chapter addresses the first of these, namely the reasons why implementation can be incomplete. We adopt a political economy approach, by which we mean we are concerned with the interface of politics and economics, rather than with politics and political systems per se . Political systems are clearly important, but attention here is confined to how economic considerations, especially the effect of reforms, influence politicians and their constituencies. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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