The Design of Reform Packages Under Uncertainty

Mathias Dewatripont () and Gérard Roland ()

No 860, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We present a model of large-scale economic reforms, modelled on the transition process in Eastern Europe, with aggregate and individual uncertainty concerning the outcome of reforms. The government is assumed to choose the speed and sequencing of reforms. We compare `big bang' strategies with gradualist reform packages. We show that 1) gradualist reform packages may be easier to get started; 2) optimal sequencing of reforms should aim at creating constituencies for further reforms; and 3) gradualism may reduce ex post reversibility of reforms through a strong investment response in cases where the option value of waiting generates a low investment response under `big bang'.

Keywords: Political Economy; Sequencing; Transition (search for similar items in EconPapers)
JEL-codes: H89 P50 (search for similar items in EconPapers)
Date: 1993-11
View citations in EconPapers

Downloads: (external link)
http://www.cepr.org/pubs/dps/DP860.asp (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: The Design of Reform Packages under Uncertainty (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:860

Ordering information: This working paper can be ordered from
http://www.cepr.org/pubs/dps/DP860.asp

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers
Address: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Series data maintained by ().