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The Interaction and Sequencing of Policy Reforms

Timothy Kehoe (), Jose Asturias (), Sewon Hur () and Kim Ruhl ()

No 521, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: In what order should a developing country adopt policy reforms? Do some policies complement each other? Do others substitute for each other? To address these questions, we develop a two-country dynamic general equilibrium model with entry and exit of firms that are monopolistic competitors. Distortions in the model include barriers to entry of firms, barriers to international trade, and barriers to contract enforcement. We find that a reform that reduces one of these distortions has different effects depending on the other distortions present. In particular, reforms to trade barriers and barriers to the entry of new firms are substitutable, as are reforms to contract enforcement and trade barriers. In contrast, reforms to contract enforcement and the barriers to entry are complementary. Finally, the optimal sequencing of reforms requires reforming trade barriers before contract enforcement.

Keywords: Sequencing reforms; Trade barriers; Entry barriers; Contract enforcement (search for similar items in EconPapers)
JEL-codes: F13 F4 O11 O19 O24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cta and nep-dge
Date: 2015-11-23
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Related works:
Journal Article: The interaction and sequencing of policy reforms (2016) Downloads
Working Paper: The Interaction and Sequencing of Policy Reforms (2016) Downloads
Working Paper: The Interaction and Sequencing of Policy Reforms (2016) Downloads
Working Paper: The Interaction and Sequencing of Policy Reforms (2015) Downloads
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