Political institutions and economic reforms in Eastern Europe and Asia: A snowball effect

Brezis, Elise S. and Verdier, Thierry (2003) Political institutions and economic reforms in Eastern Europe and Asia: A snowball effect. Economic Systems, 27 (3), 289-311. (doi:10.1016/j.ecosys.2003.03.002).

Record type: Article

Abstract

The purpose of this paper is to analyze the elements that can lead to a snowball effect during the process of transition. We develop a political economy model showing that when rulers of a country in one region opt for resigning and moving over to democratic rule, the other countries in the region are influenced to do the same. In other words, the decision of one country influences the type of equilibrium chosen by other countries in the region.
A snowball effect is thus produced that reinforces the path to privatization. Our analysis defines parameters in the technology of political repression of one country that may be affected by decisions in neighboring countries. Regional political spillovers affecting these parameters are conducive to snowball effects.

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