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Gradualism versus Big Bang: Evidence from Transition Countries

Author

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  • B. MERLEVEDE
  • K. SCHOORS

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.

Suggested Citation

  • B. Merlevede & K. Schoors, 2004. "Gradualism versus Big Bang: Evidence from Transition Countries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/243, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:04/243
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    File URL: http://wps-feb.ugent.be/Papers/wp_04_243.pdf
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    More about this item

    Keywords

    policy reform; gradualism; big bang;
    All these keywords.

    JEL classification:

    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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