Understanding Reform through Political Economy (EN)
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Transcript of Understanding Reform through Political Economy (EN)
Understanding Reform Through Political Economy
September 9, 2014
PRESENTED BY EDOUARD ALDAHDAH
MENA Knowledge Sharing and How-To in Subsidy Reform:
Regional Workshop
Why Political Economy?
Helps sort through the economic and political factors responsible for variation in development outcomes.
Strategic Interaction of Actors
Specific Institutional
Context
Feasible Policy-Making Space
Identifying Binding Constraints to Reform
Information Asymmetries
Collective Action Problems Lack of Trust
Rent-Seeking Delegation Problems
Institutional Manipulation
Collective Action Problems
Motivational Problems
Individual vs. Collective Benefits
Temptation to “Free Ride”
Overuse of resources
Information Problems
Missing Information
Asymmetric Information
Principal-Agent Problems
Lack of Trust and Rent-Seeking
Distrust: Makes potential supporters of change risk averse, severely limiting policy-makers’ capacity to reform.
Rent-Seeking: Achieving economic gain by manipulating the political or social environment.
Delegation Problems
When a principal transfers consulting, decision or implementation power to the agent (implementer).
But… the principal and the agent have conflicting interests, resulting in implementation problems.
Because the principal does not have complete information it can’t identify and address the misalignment.
Manipulating the “rules of the game” to achieve results. For example, agenda setting, when an actor uses their power to set the agenda in order to ensure a more favorable outcome for the actor.
Institutional Manipulation
Communication
• Helps create support for reform
• Improves participation in collective efforts
Increases Trust
• Solving collective action problems related to information
Corrects Information Asymmetries
Leadership
¨ Helps coordinate coalitions ¨ Disseminate information ¨ Can jumpstart a process ¨ Incentivize participation in the reform process
Timing
Good Timing Can Help Reform Progress
• Political Factors (election cycles, shifts in public opinion, changes in policy-making structures)
• Economic Factors (growth, inflation, unemployment)