Political Economy of Reform

There is a small theoretical literature on the political economy of reform. Here's an attempt to relate each paper to each other.

The seminal paper by Fernandez and Rodrik (1991) considers two kinds of reform. First, welfare-improving reform. Second, majority-benefiting reform. Both types of reform can be stalled due to individual-level uncertainty (whether or not each citizen benefits from reform is unknown to themselves).

Jain and Mukand (2003) show that welfare-improving reform can be implemented even with individual-level uncertainty if voters can vote on whether to compensate the losers from reform after reform is enacted. However, majority-benefiting reform still cannot.

Dewatripont and Roland (1995) instead analyze the case where citizens do not know whether each reform improves welfare.

All the above papers analyze the political feasibility of reforms in terms of conflicts of interest among citizens. Majumdar and Mukand (2004) instead look at it in the political agency framework (conflict of interest between government and citizens), showing why policy-makers often resist scrapping their failing policies and adopt high-risk policy experiments.