TY  - BOOK
AU  - Valderrama,Laura
TI  - Political Risk Aversion
T2  - IMF Working Papers; Working Paper
SN  - 1451873417 :
SN  - 1018-5941
PY  - 2009///
CY  - Washington, D.C.
PB  - International Monetary Fund
KW  - Criteria for Decision-Making Under Risk and Uncertainty
KW  - imf
KW  - Dynamic Voting
KW  - Expropriation
KW  - Individual Uncertainty
KW  - Innovation
KW  - Institutional Reform
KW  - China, People's Republic of
N2  - This paper studies the effect of individual uncertainty on collective decision-making to implement innovation. We show how individual uncertainty creates a bias for the status quo even under irreversible voting decisions, in contrast with Fernandez and Rodrik (1991). Blocking innovation is rooted in the aversion to the potential loss of political clout in future voting decisions. Thus, risk neutral individuals exhibit what we call political risk aversion. Yet individual uncertainty is not all bad news as it may open the door to institutional reform. We endogenize institutional reform and show a non-monotonic relationship between institutional efficiency and the size of innovation
UR  - http://elibrary.imf.org/view/IMF001/10418-9781451873412/10418-9781451873412/10418-9781451873412.xml
UR  - http://www.imfbookstore.org/IMFORG/9781451873412
ER  -