Walk the Line: Conflict, State Capacity and the Political Dynamics of Reform

47 Pages Posted: 13 Mar 2014

See all articles by Sanjay Jain

Sanjay Jain

University of Cambridge - Faculty of Economics

Sumon Majumdar

Queen's University - Department of Economics

Sharun Mukand

University of Warwick - Department of Economics

Date Written: February 21, 2014

Abstract

This paper develops a dynamic framework to analyze the political sustainability of economic reforms in developing countries. First, we demonstrate that economic reforms that are proceeding successfully may run into a political impasse, with the reform’s initial success having a negative impact on its political sustainability. Second, we demonstrate that greater state capacity, to make compensatory transfers to those adversely affected by reform, need not always help the political sustainability of reform, but can also hinder it. Finally, we argue that in ethnically divided societies, economic reform may be completed not despite ethnic conflict, but because of it.

Keywords: economic reform, state capacity, politics, redistribution, compensation, ethnic conflict

JEL Classification: D720, O200, P160

Suggested Citation

Jain, Sanjay and Majumdar, Sumon and Mukand, Sharun, Walk the Line: Conflict, State Capacity and the Political Dynamics of Reform (February 21, 2014). CESifo Working Paper Series No. 4648, Available at SSRN: https://ssrn.com/abstract=2407889 or http://dx.doi.org/10.2139/ssrn.2407889

Sanjay Jain (Contact Author)

University of Cambridge - Faculty of Economics ( email )

Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

Sumon Majumdar

Queen's University - Department of Economics ( email )

99 University Avenue
Kingston K7L 3N6, Ontario
Canada

Sharun Mukand

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

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