Reforming Finance under Fragmented Governments

57 Pages Posted: 17 Aug 2011 Last revised: 9 Oct 2019

See all articles by Francesco Di Comite

Francesco Di Comite

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN); European Commission, Joint Research Centre, Sevilla; Catholic University of Louvain (UCL)

Thomas Lambert

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Date Written: October 23, 2015

Abstract

The last decades have been characterized by a global drive to reform finance, but the process has not been homogeneous across countries and over time. What can explain the observed differences in financial reform zeal? This paper investigates the role of government cohesiveness in explaining this heterogeneity, finding that fragmented governments breed stalemate. This phenomenon has often been assumed in the literature based on circumstantial observations, but a formal, systematic assessment was still lacking. We fill this gap by exploiting a panel dataset covering the OECD countries over 30 years and undertaking several robustness checks. Our results show that the number of parties and the presence of small, decisive coalition partners slow down financial reforms. This is consistent with theoretical models in which decision making requires cooperation among different agents with conflicting policy preferences.

Keywords: financial reform, government fragmentation, investor protection, political economy

JEL Classification: D72, G18, G38, K22, O16

Suggested Citation

Di Comite, Francesco and Lambert, Thomas, Reforming Finance under Fragmented Governments (October 23, 2015). Available at SSRN: https://ssrn.com/abstract=1911148 or http://dx.doi.org/10.2139/ssrn.1911148

Francesco Di Comite

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN) ( email )

BU-1 05/190
Brussels, Bruxelles B-1049
Belgium

European Commission, Joint Research Centre, Sevilla ( email )

Call Inca Garcilaso 3
Sevilla, SE 41092
Spain

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

Thomas Lambert (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.sites.google.com/site/lambertthom

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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