Understanding Reform through Political Economy (EN)

Understanding Reform Through Political Economy

September 9, 2014

PRESENTED BY EDOUARD ALDAHDAH

MENA Knowledge Sharing and How-To in Subsidy Reform:

Regional Workshop

Why Political Economy?

Helps sort through the economic and political factors responsible for variation in development outcomes.

Strategic Interaction of Actors

Specific Institutional

Context

Feasible Policy-Making Space

Current Policy-Making Space

Ideal Space for Change

How-To Expand the Space for Reform

Identifying Binding Constraints to Reform

Information Asymmetries

Collective Action Problems Lack of Trust

Rent-Seeking Delegation Problems

Institutional Manipulation

Collective Action Problems

Motivational Problems

Individual vs. Collective Benefits

Temptation to “Free Ride”

Overuse of resources

Information Problems

Missing Information

Asymmetric Information

Principal-Agent Problems

Lack of Trust and Rent-Seeking

Distrust: Makes potential supporters of change risk averse, severely limiting policy-makers’ capacity to reform.

Rent-Seeking: Achieving economic gain by manipulating the political or social environment.

Delegation Problems

When a principal transfers consulting, decision or implementation power to the agent (implementer).

But… the principal and the agent have conflicting interests, resulting in implementation problems.

Because the principal does not have complete information it can’t identify and address the misalignment.

Manipulating the “rules of the game” to achieve results. For example, agenda setting, when an actor uses their power to set the agenda in order to ensure a more favorable outcome for the actor.

Institutional Manipulation

Solutions to Binding Constraints

Communication Leadership Bundling

Timing Sequencing Agenda Setting

Communication

•  Helps create support for reform

•  Improves participation in collective efforts

Increases Trust

•  Solving collective action problems related to information

Corrects Information Asymmetries

Bundling

The reform you want to pass Another reform

in one package…

Leadership

¨  Helps coordinate coalitions ¨  Disseminate information ¨  Can jumpstart a process ¨  Incentivize participation in the reform process

Timing

Good Timing Can Help Reform Progress

•  Political Factors (election cycles, shifts in public opinion, changes in policy-making structures)

•  Economic Factors (growth, inflation, unemployment)

Sequencing

Sequencing and Pacing can help build support and ownership of reform