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Non-cooperative and Cooperative Policy Reforms under Uncertainty and Spillovers

Carsten Hefeker and Michael Neugart ()

No 6329, CESifo Working Paper Series from CESifo Group Munich

Abstract: When countries need to implement costly economic policy reforms, these often imply uncertainties about their effectiveness for the home country and their spillovers to other countries. We develop a model to show that under these circumstances countries implement too few or too many policy reforms. From a social perspective, too many reforms follow if the spillover effects of reforms become sufficiently uncertain. Since centralization of policies to correct inefficient policies is often not possible, we look for alternative instruments that can restore the efficient level of reforms. We compare subsidizing reform efforts with insuring against bad outcomes, and argue that subsidies are advantageous in terms of requiring less information for implementation.

Keywords: policy reforms; spillovers; policy uncertainty; free-riding; subsidy; insurance (search for similar items in EconPapers)
JEL-codes: F55 H70 O30 (search for similar items in EconPapers)
Date: 2017
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Related works:
Journal Article: Non-cooperative and cooperative policy reforms under uncertainty and spillovers (2018) Downloads
Working Paper: Non-cooperative and Cooperative Policy Reforms under Uncertainty and Spillovers (2018)
Working Paper: Non-cooperative and Cooperative Policy Reforms under Uncertainty and Spillovers (2017) Downloads
Working Paper: Non-cooperative and Cooperative Policy Reforms under Uncertainty and Spillovers (2017) Downloads
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