Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/180177
Authors: 
Hefeker, Carsten
Neugart, Michael
Year of Publication: 
2017
Series/Report no.: 
Volkswirtschaftliche Diskussionsbeiträge No. 181-17
Abstract: 
When countries need to implement costly economic policy reforms, these often imply uncertainties about their effectiveness for the homecountry 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 ineffcient 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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