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The Interaction and Sequencing of Policy Reforms

Author

Listed:
  • Timothy Kehoe

    (University of Minnesota)

  • Sewon Hur

    (University of Pittsburgh)

  • Kim Ruhl

    (New York University Stern School of Busi)

  • Jose Asturias

    (Georgetown University)

Abstract
In what order should a developing country adopt policy reforms? Do some policies complement each other? Do others substitute for each other? To address these questions, we develop a two-country dynamic general equilibrium model with entry and exit of firms that are monopolistic competitors. Distortions in the model include barriers to entry of firms, barriers to international trade, and barriers to contract enforcement. We find that a reform that reduces one of these distortions has different effects depending on the other distortions present. In particular, reforms to trade barriers and barriers to the entry of new firms are substitutable, as are reforms to contract enforcement and trade barriers. In contrast, reforms to contract enforcement and the barriers to entry are complementary. Finally, the optimal sequencing of reforms requires reforming trade barriers before contract enforcement.

Suggested Citation

  • Timothy Kehoe & Sewon Hur & Kim Ruhl & Jose Asturias, 2016. "The Interaction and Sequencing of Policy Reforms," 2016 Meeting Papers 316, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:316
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Jose Asturias & Sewon Hur & Timothy J. Kehoe & Kim J. Ruhl, 2023. "Firm Entry and Exit and Aggregate Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(1), pages 48-105, January.
    2. Lopez-Martin, Bernabe & Perez-Reyna, David, 2021. "Contracts, firm dynamics, and aggregate productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 130(C).
    3. Yan Bai & Keyu Jin & Dan Lu, 2019. "Misallocation Under Trade Liberalization," NBER Working Papers 26188, National Bureau of Economic Research, Inc.
    4. Elena Cefis & Cristina Bettinelli & Alex Coad & Orietta Marsili, 2022. "Understanding firm exit: a systematic literature review," Small Business Economics, Springer, vol. 59(2), pages 423-446, August.
    5. David Kohn & Fernando Leibovici & Michal Szkup, 2023. "No Credit, No Gain: Trade Liberalization Dynamics, Production Inputs, And Financial Development," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 809-836, May.
    6. Ferrari, Alessandro, 2023. "Losers amongst the Losers:," Research in Economics, Elsevier, vol. 77(1), pages 34-59.
    7. Jin, Keyu, 2019. "Misallocation Under Trade Liberalization," CEPR Discussion Papers 13976, C.E.P.R. Discussion Papers.
    8. Clemens Buchen, 2023. "Institutional reform paths," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 1099-1121, November.
    9. Cacciatore, Matteo & Duval, Romain & Fiori, Giuseppe & Ghironi, Fabio, 2016. "Market reforms in the time of imbalance," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 69-93.
    10. Ferrari, Alessandro, 2020. "Losers amongst the losers: the welfare effects of the Great Recession across cohorts," Working Paper Series 2509, European Central Bank.
    11. Ivan Ajdukovic & Sylvain Max & Rodolphe Perchot & Eli Spiegelman, 2018. "The Economic Psychology of Gabriel Tarde: Something new for behavioral economics?," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 2(1), pages 5-11, March.
    12. Flavia Corneli, 2021. "Financial Integration Without Financial Development," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 49(2), pages 201-220, June.
    13. Laszlo Tetenyi, 2021. "Trade, Misallocation, and Capital Market Integration," Working Papers w202119, Banco de Portugal, Economics and Research Department.
    14. Sewon Hur, 2018. "The Lost Generation of the Great Recession," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 179-202, October.
    15. Campos, Nauro F. & De Grauwe, Paul & Ji, Yuemei, 2023. "Structural reforms and economic performance: the experience of advanced economies," LSE Research Online Documents on Economics 120870, London School of Economics and Political Science, LSE Library.
    16. Daniela Costa & Timothy J. Kehoe & Gajen Raveendranathan, 2016. "The Stages of Economic Growth Revisited, Part 2: Catching Up to and Joining the Economic Leader," Economic Policy Paper 16-6, Federal Reserve Bank of Minneapolis.

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    More about this item

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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