Speed of adjustment and self-fulfilling failure of economic reform

• 成果类型: Article
• 署名作者: Mehlum, H
• 署名单位: University of Oslo
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(00)00056-8
• 发表日期: 2001
• 页码: 149-167
• 关键词: economic reform; multiple equilibria

摘要

An economic reform programme where inefficient public labour is laid off is considered. The immediate effect is a lowering of wages and increased profitability in the private modem sector. Over time, as capital accumulates in the modem sector, wages and production increases. Big bang reform generates a sharp transitory drop in wages while gradual reform gives a more modest decline. In the presence of a subsistence wage constraint popular resistance can cause the cancellation of big bang reform. Two arguments for gradualism can in that case be made. First, a more gradual reform requires a less abrupt drop in the wage, and will, therefore be feasible. Second, the initial wage drop will be stronger if a cancellation of reform is expected and, since cancellation is dependent on the severity of the initial wage drop, multiple equilibria occurs. The existence of multiple equilibria is dependent on the speed of reform. Sufficiently gradual programmes have a unique successful equilibrium. (C) 2001 Elsevier Science B.V. All rights reserved.