Learning Dynamics and Support for Economic Reforms: Why Good News Can Be Bad

31 Pages Posted: 20 Apr 2016

See all articles by Sweder van Wijnbergen

Sweder van Wijnbergen

Universiteit van Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Tim Willems

University of Oxford - Nuffield College of Medicine

Date Written: July 1, 2014

Abstract

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.

Keywords: Social Analysis, State Owned Enterprise Reform, Economics and Finance of Public Institution Development, Government Policies, Public Sector Administrative & Civil Service Reform, Energy Privatization, Democratic Government, National Governance, Youth and Governance, Quality of Life & Leisure, Public Sector Administrative and Civil Service Reform, De Facto Governments, Privatization

Suggested Citation

van Wijnbergen, Sweder and Willems, Tim, Learning Dynamics and Support for Economic Reforms: Why Good News Can Be Bad (July 1, 2014). World Bank Policy Research Working Paper No. 6973. Available at SSRN: https://ssrn.com/abstract=2470233

Sweder Van Wijnbergen (Contact Author)

Universiteit van Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4011 / 4203 (Phone)
+31-35-624 91 82 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tim Willems

University of Oxford - Nuffield College of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

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