Why Do Reforms Occur in Crises Times?

37 Pages Posted: 16 Jun 2016

See all articles by Romain G. Rancière

Romain G. Rancière

University of Southern California

Aaron Tornell

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: June 2016

Abstract

Structural reforms, whereby organized groups lose their power to extract rents, tend to occur in bad times rather than during prosperous times. We present a model where rent-seeking leads to economic decline, which, in turn, will make a future reform inevitable when times will be bad enough. Furthermore, we show that in the case of trade liberalization – a prime example of structural reform – there is strong empirical evidence that reforms are induced by severe crises.

Keywords: Structural Reforms; Trade Liberalization; Crises; Tragedy of Commons; Preemption Games.

JEL Classification: G01,P11, C73, F13

Suggested Citation

Rancière, Romain G. and Tornell, Aaron, Why Do Reforms Occur in Crises Times? (June 2016). USC-INET Research Paper No. 16-19. Available at SSRN: https://ssrn.com/abstract=2796251 or http://dx.doi.org/10.2139/ssrn.2796251

Romain G. Rancière (Contact Author)

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Aaron Tornell

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Bunche Hall 8387
Los Angeles, CA 90095-1477
United States
310-794-1686 (Phone)
310-825-9528 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
88
Abstract Views
627
rank
287,722
PlumX Metrics