IMF: Reform Doesn’t Have to Cost Votes

Economic reforms are often painful in the short term and hence unpopular, but does that mean reform-minded leaders always pay a price at the ballot box? Not necessarily, we learned in our analysis of structural reforms and election outcomes in 66 countries.

The question is timely, because the economic policy agenda in both advanced and developing economies is increasingly focused on structural reforms, amid persistently weak medium-term growth and limited fiscal space in many countries.

Policies that change the way governments work—known as structural reforms—range from reducing regulatory barriers to competition and opening to trade and financial flows to increasing labor market flexibility. They are motivated by objectives that include raising productivity, investment, and employment and making the economy more resilient to shocks.

While there has been broad agreement on the economic benefits of structural reforms, the political impact is less settled. This is because reforms may generate gains for society as a whole only in the longer term while inflicting short-term pain on some sectors. Those affected may be highly vocal and well organized. When this happens, politicians may hold back on reforms for fear they will be penalized at the ballot box.

Συνέχεια ανάγνωσης εδώ: blogs.imf.org