Why do countries delay stabilizations of large and increasing budget deficits and inflation? And what explains the timing of reforms? We use the war of attrition model as a guidance for our empirical study on a vast sample of countries. We find that stabilizations are more likely to occur when time of crisis occur, at the beginning of term of office of a new government, in countries with "strong" governments, (i.e. presidential systems and unified governments with a large majority of the party in office), and when the executive faces less constraints. The role of external inducements like IMF programs has at best a weak effect, but problems of reverse causality are possible.
Publication Type: WCFIA Working Paper
Published Date: February 2006
Field of Interest: International Economics
Alesina, Alberto, Silvia Ardagna, and Francesco Trebbi. “Who Adjusts and When? On the Political Economy of Reforms.” Working Paper 2007-14, Weatherhead Center for International Affairs, Harvard University, 2007.