Gradualism versus Big Bang: Evidence from Transition Countries

Bruno Merlevede and Koen Schoors

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper uses previous empirical work to simulate the impact on real economic growth of the big bang and gradualist approaches to reform. Uncertainty concerning the appropriate reform steps introduces the possibility of reform reversals. We find that higher expected probabilities of reversal make policymakers more likely to opt for gradualism. Even relatively small probabilities are su.cient to tilt the balance in favour of gradualism. This is reinforced by shortsightedness of policymakers that follows from standard political cycles, but may be moderated by voter myopia.

Keywords: policy reform; gradualism; big bang (search for similar items in EconPapers)
JEL-codes: O57 P21 P26 P27 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2004-04
New Economics Papers: this item is included in nep-eec
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:04/243

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