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In this book, Federico Sturzenegger and Mariano Tommasi propose formal models to answer some of the questions raised by the recent reform experience of many Latin American and East European countries. They apply common standards of analytical rigor to the study of economic and political behavior, assuming political agents to be rational and forward-looking, with expectations consistent with the properties of the underlying model.

The book is organized around three basic questions: first, why do reforms take place? Second, how are reforms implemented? And third, which candidates are most likely to undertake reform? Although most of the chapters deal with policy issues in developing economies, the findings also apply to areas such as social security and health care reform in industrialized countries.

1 Introduction
Federico Sturzenegger and Mariano Tommasi

I. Why? (The Positive Political Economy of Reforms)

Inaction and Delay
2 The Political Economy of Delayed Reform
Allan Drazen

3 Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty
Raquel Fernandez and Dani Rodrik

4 Why Are Stabilizations Delayed?
Alberto Alesina and Allan Drazen

5 Fiscal Conservatism as a Response to the Debt Crisis
Raúl Labán and Federico Sturzenegger

6 The Benefit of Crises for Economic Reforms
Allan Drazen and Vittorio Grilli

Dynamics
7 Recurrent High Inflation and Stabilization: A Dynamic Game
Guillermo Mondino, Federico Sturzenegger, and Mariano Tommasi

8 The Common Property Approach to the Political Economy of Fiscal Policy
Andrés Velasco

9 Fiscal Discipline in a Union
Joshua Aizenman

10 The Rush to Free Trade in the Developing World: Why So Late? Why Now? Will It Last?
Dani Rodrik

II. How? (Strategies for Reformers)
11 The Design of Reform Packages under Uncertainty
Mathias Dewatripont and Gérard Roland

12 Gradualism versus Big-Bang: Speed and Sustainability of Reforms
Shang-Jin Wei

13 Sequencing of Economic Reforms in the Presence of Political Constraints
César Martinelli and Mariano Tommasi

III. Who? (The Identity of Reformers)
14 Promises, Promises: Credible Policy Reform via Signalling
Dani Rodrik

15 Credibility of Policymakers and of Economic Reforms
Alex Cukierman and Mariano Tommasi

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