Learning Dynamics and Support for Economic Reforms : Why Good News Can Be Bad
Support for economic reforms has often shown puzzling dynamics: many reforms that began successfully lost public support. This paper shows that learning dynamics can rationalize this paradox because the process of revealing reform outcomes is an ex...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank Group, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/07/19877963/learning-dynamics-support-economic-reforms-good-news-can-bad http://hdl.handle.net/10986/19351 |
| Summary: | Support for economic reforms has often
shown puzzling dynamics: many reforms that began
successfully lost public support. This paper shows that
learning dynamics can rationalize this paradox because the
process of revealing reform outcomes is an example of
sampling without replacement. This concept challenges the
conventional wisdom that one should begin by revealing
reform winners. It may also lead to situations in which
reforms that enjoy both ex ante and ex post majority support
will still not come to completion. The framework can be used
to explain why gradual reforms worked well in China (where
successes in Special Economic Zones facilitated further
reform), whereas this was much less the case for Latin
American and Central and Eastern European countries. |
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