Economic reform: Political environment and the efficacy of economic conditionalities

This paper presents a public choice model that consists of a special interest group that benefits from distortionary economic policies, the general public who suffers from such policies, and a government that implements these policies. The paper examines how these actors respond to externally imposed conditions that force the government either to implement economic reforms or face the loss of outside assistance. Depending on the domestic political environment, the imposition of economic conditionalities may prove effective, unnecessary, or even counterproductive.