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Reforming Finance Under Fragmented Governments

Francesco Di Comite and Thomas Lambert ()

Comparative Economic Studies, 2020, vol. 62, issue 1, No 5, 105-148

Abstract: Abstract The last decades have been characterized by a global drive to reform finance, but the process has not been homogeneous across countries and over time. What can explain the observed differences in financial reform zeal? This paper investigates the role of government cohesiveness in explaining this heterogeneity, finding that fragmented governments breed stalemate. This phenomenon has often been assumed in the literature based on circumstantial observations, but a formal, systematic assessment was still lacking. We fill this gap by exploiting a panel dataset covering the OECD countries over 30 years and undertaking several robustness checks. Our results show that the number of parties and the presence of small, decisive coalition partners slow down financial reforms. This is consistent with theoretical models in which decision making requires cooperation among different agents with conflicting policy preferences.

Keywords: Financial reform; Government fragmentation; Investor protection; Political economy (search for similar items in EconPapers)
JEL-codes: D72 G18 G38 K22 O16 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1057/s41294-019-00108-w

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