The Interaction and Sequencing of Policy Reforms

Timothy Kehoe, Sewon Hur, Kim Ruhl and Jose Asturias

No 316, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: In what order should a developing country adopt policy reforms? Do some policies complement each other? Do others substitute for each other? To address these questions, we develop a two-country dynamic general equilibrium model with entry and exit of firms that are monopolistic competitors. Distortions in the model include barriers to entry of firms, barriers to international trade, and barriers to contract enforcement. We find that a reform that reduces one of these distortions has different effects depending on the other distortions present. In particular, reforms to trade barriers and barriers to the entry of new firms are substitutable, as are reforms to contract enforcement and trade barriers. In contrast, reforms to contract enforcement and the barriers to entry are complementary. Finally, the optimal sequencing of reforms requires reforming trade barriers before contract enforcement.

Date: 2016
New Economics Papers: this item is included in nep-bec, nep-cse, nep-cta and nep-dge
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Citations: View citations in EconPapers (21)

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Related works:
Journal Article: The interaction and sequencing of policy reforms (2016)
Working Paper: The Interaction and Sequencing of Policy Reforms (2016)
Working Paper: The Interaction and Sequencing of Policy Reforms (2015)
Working Paper: The Interaction and Sequencing of Policy Reforms (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:316

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