 Compensations as signaling devices in the political economy of reformsRui Castro and Daniele Coen-Pirani International Economic Review, 2003, vol. 44, issue 3, 1061-1078 Abstract: We propose an explanation for why efficient reforms are not carried out when losers can block their implementation and compensations are feasible. In our model, a government tries to sequentially implement two efficient reforms by bargaining with interest groups. The organization of interest groups is endogenous. Compensations are distortionary and different governments care differently about distortions. Governments use low compensations to discourage losers who just want to receive transfers from organizing. This comes at the cost of reforms being blocked by interest groups with relatively high losses, resulting in a bias against payment of compensations and the implementation of reforms. Copyright 2003 By The Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association. Date: 2003 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ier:iecrev:v:44:y:2003:i:3:p:1061-1078 Ordering information: This journal article can be ordered from Access Statistics for this article International Economic Review is currently edited by Harold L. Cole More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC. |
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