search query: @indexterm TRANSITION ECONOMICS / total: 3
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| Author: | Bertocchi, G. Spagat, M. |
| Title: | Structural uncertainty and subsidy removal for economies in transition |
| Journal: | European Economic Review
1997 : DEC, VOL. 41:9, p. 1709-1733 |
| Index terms: | TRANSITION ECONOMICS SUBSIDIES UNCERTAINTY LEARNING |
| Language: | eng |
| Abstract: | Economies in transition are faced with a high degree of "structural uncertainty" the effects of which on a subsidy removal program are studied. Subsidy removal causes unemployment, but yields fiscal benefits and facilitates private sector growth. When the policymaker does not know the speed with which the private sector absorbs the unemployed, he will be driven toward a more decisive, and therefore more informative, policy. The model also rationalizes policy reversals and implies that irreversibility constraints and political instability dampen the learning effect making policy more gradualist. |
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