Economic reforms and political constraints: on the time inconsistency of gradual sequencing.

Abstract

This paper presents a model portraying a country in a political deadlock about reform proposals that hurt strongly organized interest groups. We show that, under sorne circumstances (no ability to precommit, veto power by interest groups), only far reaching reforms (even if quite costly) have hope of success. The model intends to explain why in recent years several Latin American countries have gone for radical reform.