Mukand, Sharun W. and Rodrik, Dani (2002) In search of the Holy Grail : policy convergence, experimentation, and economic performance. Working Paper. The National Bureau of Economic Research, Cambridge, Mass. (Unpublished)

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Abstract

We consider a model of policy choice in which appropriate policies depend on a country’’s own circumstances, but the presence of a successful leader generates an informational externality and results in too little ““policy experimentation.”” Corrupt governments are reined in while honest governments are disciplined inefficiently. Our model yields distinct predictions about the patterns of policy imitation, corruption, and economic performance as a function of a country’’s location vis-àà-vis successful leaders. In particular, it predicts a U-shaped pattern in economic performance as we move away from the leader in the relevant space of characteristics: close neighbors should do very well, distant countries moderately well on average with considerable variance, and intermediate countries worst of all. An empirical test with the experience of post-socialist countries provides supportive results.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory J Political Science > JA Political science (General)
Divisions:	Faculty of Social Sciences > Economics
Series Name:	NBER Working Papers
Publisher:	The National Bureau of Economic Research
Place of Publication:	Cambridge, Mass
Date:	September 2002
Number:	No.9134
Status:	Not Peer Reviewed
Publication Status:	Unpublished
Access rights to Published version:	Open Access
Funder:	Ford Foundations, Rockefeller Foundations
Related URLs:	Publisher
URI:	http://wrap.warwick.ac.uk/id/eprint/45537

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