Why Are Stabilizations Delayed?

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Why Are Stabilizations Delayed?

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Title: Why Are Stabilizations Delayed?
Author: Drazen, Allan; Alesina, Alberto

Note: Order does not necessarily reflect citation order of authors.

Citation: Alesina, Alberto, and Allan Drazen. 1991. Why are stabilizations delayed? American Economic Review 81(5): 1170-1188.
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Abstract: When a stabilization has significant distributional implications (e.g., tax increases to eliminate a large budget deficit), socioeconomic groups may attempt to shift the burden of stabilization onto other groups. The process leading to stabilization becomes a "war of attrition," each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden. We solve for the expected time of stabilization in a model of "rational" delay and relate it to several political and economic variables. We motivate this approach and its results by comparison to historical and current episodes.
Published Version: http://www.jstor.org/stable/2006912
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4553028
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