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Resistance to reform: Reconsidering the role of individual-specific uncertainty

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Abstract

Individual-specific uncertainty may increase the chances of reform being enacted and sustained. Reform may be more likely to be enacted because a majority of agents might end up losing little from reform and a minority gaining a lot. Under certainty, reform would therefore be rejected, but it may be enacted with uncertainty because those who end up losing believe that they might be among the winners. Reform may be more likely to be sustained because, in a realistic setting, reform will increase the incentives of agents to move into those economic activities that benefit. Agents who respond to these incentives will vote to sustain reform in future elections, even if they would have rejected reform under certainty. These points are made using the trade-model of Fernandez and Rodrik (AER, 1991).

Suggested Citation

  • Antonio Ciccone, 1998. "Resistance to reform: Reconsidering the role of individual-specific uncertainty," Economics Working Papers 537, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2001.
    • Handle: RePEc:upf:upfgen:537
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    References listed on IDEAS

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    1. Rodrik, Dani, 1991. "Policy uncertainty and private investment in developing countries," Journal of Development Economics, Elsevier, vol. 36(2), pages 229-242, October.
    2. Braillard, S. Lael & Verdier, Thierry, 1994. "Lobbying and adjustment in declining industries," European Economic Review, Elsevier, vol. 38(3-4), pages 586-595, April.
    3. Stephen Morris & Stephen Coate, 1999. "Policy Persistence," American Economic Review, American Economic Association, vol. 89(5), pages 1327-1336, December.
    4. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    5. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
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    More about this item

    Keywords

    Status-quo bias; bias against reform; individual-specific uncertainty;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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