TY  - JOUR
AU  - Alesina,Alberto
AU  - Drazen,Allan
TI  - Why are Stabilizations Delayed?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3053
PY  - 1989
Y2  - August 1989
UR  - http://www.nber.org/papers/w3053
L1  - http://www.nber.org/papers/w3053.pdf
N1  - Author contact info:
Alberto F. Alesina
Department of Economics
Harvard University
Littauer Center 210
Cambridge, MA 02138
Tel: 617/495-8388
Fax: 617/495-7730
E-Mail: aalesina@harvard.edu

Allan Drazen
Department of Economics
University of Maryland
College Park, MD 20742
Tel: 301/405-3477
Fax: 301/405-7835
E-Mail: drazen@econ.umd.edu
AB  - When a stabilization has significant distributional implications (as in the case of tax increases to eliminate a large budget deficit) different socio-economic groups will attempt to shift the burden of stabilization onto other groups. The process leading to a stabilization becomes a "war of attrition", with each group finding it rational to attempt to wait the others out. Stabilization occurs only when one group concedes and is forced to bear a disproportionate share of the burden of fiscal adjustment. We solve for the expected time of stabilization in a model of "rational" delay based on a war of attrition and present comparative statics results relating the expected time of stabilization to several political and economic variables. We also motivate this approach and its results by comparison to historical episodes.
ER  -