The political economy of reform: Lessons from pensions, product markets and labour markets in ten OECD countries

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Why are some policy reforms implemented while others languish? This new report aims to answer this important question by looking backwards - at 20 structural reform efforts in 10 OECD countries, during the past two decades. The case studies cover a wide variety of reform attempts in three key areas - pensions, labour-, and product-market regulation. Key factors in the political, economic and reform-specific domains are identified as helping or hindering reform, and these findings are cross-checked using a relatively simple set of Spearman rank correlations. The report’s two-pronged analytical approach - quantitative and qualitative - results in unique insights for policy makers designing, adopting and implementing structural policy reforms.

Issues

The aim of this study is to identify political economy lessons that may be of use to policy-makers seeking to design, adopt and implement structural reforms. Many of the political economy factors that facilitate or hinder economic reform have already been examined in econometric work by the OECD Economics Department. The present study builds on this work, adopting an inductive approach, based on twenty case studies of attempts to adopt and implement structural reforms in three domains, pensions, labour-markets and product-market regulation, in an effort to explore more deeply some of the econometric findings and their implications, and also to examine factors that may be extremely difficult to quantify or code for inclusion in regression analyses. The study employs a "focused comparison" approach to case-study research, which basically entails asking the same questions across a substantial number of cases in order to discern similarities among them that suggest possible generalisations. The comparative case-study approach does not permit the same the level of formal verification as may be achieved with econometric methods, but it facilitates more detailed study of the context-dependent nature of certain relationships among variables and makes it easier to trace the links between possible causes and observed outcomes in order to assess whether the causal relationships implied by a hypothesis are evident in the sequence of events as they unfold.

Presentation by William Tompson: The political economy of reform: Lessons from pensions, product markets and labour markets in ten OECD countries

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