In the last two decades, striking correlations in the location and timing of structural pension reforms have raised important questions about the kind of information used by policy makers in their decisions to adopt such measures. This study tests the hypothesis that the adoption of pension privatization is shaped systematically by an interdependent logic, wherein the decision to privatize pensions in one country is systematically linked to corresponding decisions made by governments in relevant peer nations. Duration analysis with time‐varying covariates of data from 59 countries between 1980 and 1999 reveals that the decision to adopt a private pension reform in one country increases systematically as the proportion of peer nations that have adopted corresponding measures rises. Importantly, the effect of this peer dynamic varies across groups of nations, with the most powerful impact of peer decisions being found among Eastern European and Central Asian nations. Peer dynamics likewise contribute powerfully to the adoption of private pension reforms in Latin America, but do not significantly shape the hazard of privatization among the Organization for Economic Cooperation and Development member nations. Even controlling for diffusion mechanisms, the analysis shows that pension reform decisions remain subject to domestic political and economic considerations, including demographic pressures, financial costs and incentives to reform, and constraints delimited by the political institutions in each nation.
We assess how investors evaluate sovereign borrowers, arguing that sovereign risk is less “sovereign” than previous research assumes. Investors evaluate governments based not only on what they do, but also on investors' views of similar, “peer” countries. Professional investors use investment categorizations (geography, sovereign credit rating, or level of market development) as a heuristic device. As a result, peer country effects, as well as country‐specific and global factors (booms, crises, or shocks), should explain sovereign interest rates. The peer effects we expect are regular features of international capital markets, rather than phenomena that occur in periods of market turmoil. We assess our expectations using error correction models of monthly sovereign risk premiums, which reveal significant interdependencies in sovereign risk assessments among countries, net of global and domestic predictors. Such contagion emerges principally in the short term, although we also find robust, long‐term ties in sovereign risk assessments among countries sharing common regional classifications. Hence, our evidence suggests that professional investors' reliance on country categorizations facilitates the transmission of market sentiments—which include lower as well as higher risk premiums charged—across groups of countries, even when countries differ in key measures of creditworthiness. Our analyses highlight the importance of investors' ideas regarding country categorizations; they call into question the efficiency of sovereign debt markets.
Existing approaches to the study of economic reform have focused on the mobilization of special interests that oppose liberalization and have tended to assume that reform dynamics follow a similar logic across distinct policy arenas. Analysis of the dynamics of capital account and trade liberalization in 19 Latin American countries between 1985 and 1999 demonstrates otherwise. Movement toward liberalization is shaped systematically by the timing and salience of each reform's distributional costs and partisan political dynamics. In turn, the timing and magnitude of costs are mediated by the economic context, while salience depends on the informational environment. Our findings thus differ from the conventional wisdom on several scores, particularly by emphasizing the ways in which good rather than bad economic conditions can facilitate reforms, the conditionality of legislative politics of reform enactment on whether reforms are characterized by ex ante conflict or fears of ex post blame, and how the type of reform shapes its political dynamics.
When and where is cross-national diffusion an important determinant of policy innovation? I posit that the characteristics of a policy innovation-whether it imposes high or low "sunk" costs on adopters-and country attributes such as wealth, mediate the importance of diffusion in domestic policy choices. Competing risks analysis of two structural pension reform models in 71 developing and industrialized countries supports these hypotheses. Peer diffusion weighs heavily in the adoption of the costly "funded" defined-contribution pension reform model, and does so principally among middle-income nations, while the less-costly "notional" defined-contribution pension reform is not governed by diffusion.
Although research in the advanced industrial nations has identified a supportive link between an expanded public sector role and economic openness, studies of the developing world have been much less sanguine about the possibilities of broader state intervention in the context of economic liberalization. The authors investigate the possibility that governments in Latin America may “embed” economic openness in a broader public sector effort. They find that while several countries have moved toward an orthodox neoliberal model with minimal state interventions, other Latin American governments have maintained a broader public sector presence on the supply side of the economy while pursuing deep liberalization. They call the latter strategy “embeddedneoliberalism,” to distinguish it from the more egalitarian ambitions of postwar embedded liberalism. Cross-sectional time-series analysis reveals that embedded neoliberal strategies in Latin America have grown out of a legacy of advanced import-substitution industrialization and have been promoted by nonleft governments, except in cases where labor is very strong. The orthodox neoliberal model, by contrast, has emerged where postwar industrial development was attenuated and where labor unions were weakened considerably by the debt crisis.
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