Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162653
Authors: 
Hefeker, Carsten
Neugart, Michael
Year of Publication: 
2017
Series/Report no.: 
Joint Discussion Paper Series in Economics 07-2017
Abstract: 
When countries need to implement costly economic policy reforms, these often imply uncertainties about their effectiveness for the home country and their spillovers to other countries. We develop a model to show that under these circumstances countries implement too few or too many policy reforms. From a social perspective, too many reforms follow if the spillover effects of reforms become sufficiently uncertain. Since centralization of policies to correct inefficient policies is often not possible, we look for alternative instruments that can restore the efficient level of reforms. We compare subsidizing reform e orts with insuring against bad outcomes, and argue that subsidies are advantageous in terms of requiring less information for implementation.
Subjects: 
policy reforms
spillovers
policy uncertainty
free-riding
subsidy
insurance
JEL: 
F55
H70
O30
Document Type: 
Working Paper

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