thus widely recognized as one of the earliest and most important steps in theadjustment process, as well as a continuing policy challenge for countriesattempting to realize their full growth potential.The findings of the study contribute to the existing literature on the poli-tics of economic adjustment by underlining the importance of subnational policy choice for national performance and by suggesting a revised under-standingofthepolicyimpactofpoliticalcompetition.Contrarytomostprior research,wearguethatpoliticalcompetitionfacilitatesadjustmentbyunder-mining incentives for the construction and maintenance of large public sec-tors. We find considerable evidence that interactions between party systemcompetition, dependence on outside revenue sources, and patronage spend-ing shape fiscal performance at the subnational level and thereby conditionthe capacity for economic adjustment at the national level.
THEORETICAL PERSPECTIVES ON THEPOLITICS OF ECONOMIC ADJUSTMENT
Efforts to alter the policy status quo characteristically generate politicalopposition. According to prior research, however, the politics of economicstabilization and adjustment are particularly problematic. Whereas the costsof economic reform tend to be certain, immediate, and concentrated, thegains may be too long-term, uncertain, and diffuse to mobilize political sup- port (Fernandez & Rodrick, 1991; Nelson, 1993; Pierson, 1994, pp. 8-18;Rodrik,1994,pp.61-88).Theseasymmetriescanbeexaggeratedtothepointthatreformappearsallbuttheoreticallyinexplicable,forcinganalyststorelyon explanations emphasizing conjunctural factors, such as “outstandingleaders”(Harberger,1993,p.343),“coherenteconomicteams”(Williamson&Haggard,1994,pp.579-589),andcrisisconditions(Rodrik,1994;Weyland,1996). Nevertheless, the conventional wisdom effectively highlights poten-tial tensions between the economic and political rationality of economicreform.Atthenationallevel,thesetensionsarelikelytobemitigatedbyelectoralconsiderations. Macroeconomic problems, such as high inflation, lowgrowth, and import shortages, can pose political risks for politicians elected bynationalconstituencies.AsemphasizedbyHunter(1997),“Morethananyother single political actor, the president is held accountable for the generalstate of affairs in the country and, by extension, for the failure of key collec-tive goods to be met” (p. 99). Thus, deteriorating economic conditions cancreate electoral incentives for national political leaders to adopt appropriateeconomic policies. These incentives are likely to be reinforced by
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