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. We show that learning dynamics can rationalize this paradox because the process of revealing reform outcomes is an example of sampling without replacement. We show that this co...
| Main Authors: | , |
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| Format: | Journal Article |
| Language: | en_US |
| Published: |
Published by Oxford University Press on behalf of the World Bank
2017
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10986/27690 |
| Summary: | Support for economic reforms has often shown puzzling dynamics: many reforms that
began successfully lost public support. We show that learning dynamics can rationalize
this paradox because the process of revealing reform outcomes is an example of sampling without replacement. We show that 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. We use our framework 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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