Despite of the fact that the market economy has demonstrated its superiority before the others types of economies it is still not protected from crises. Economic crises are usually connected with the end of business cycles but they can also take place by the negative state of economy or mistakes of governments. In any case crises have negative influence on the electoral support of governments because voters have to accept such negative economic phenomena as unemployment, inflation, bankruptcy of banks and companies. Voters are inclined to blame governments and political actors with such problems.
The most popular form of response of governments to economic crises is the implication of appropriate economic reforms. Some reforms can have negative consequences for voters and therefore for the electoral support and restrict some essential options of the welfare state. Nevertheless the examples from the current crisis of the Euro zone as well as the examples from previous crises show that certain states implement reforms and therefore overcome crisis more successful than others. In this way, the problem of this term paper is the following one: why are some countries in the Euro zone are more successful in implementing reforms than others?
In order to answer this question first of all the theoretical frames are represented. They include two theories which explain the decision of governments to undertake economic reforms as well as the behavior during the reforms’ implementation. The empirical examples of Italy which went through the severe economic crisis before the joining the Euro zone in the 1990s and Ireland which suffered from the financial crisis of 2008 – 2009 as a member state of the Euro zone and then overcame it will show how and why some countries can be successful in implementation of risky reforms in practice.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- I. Theories of state reforms
- 1. The Prospect Theory
- 2. The Theory of Blame Avoidance
- II. Empirical examples
- 1. Italy in 1990s
- 2. Ireland in 2008-2010
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This term paper aims to investigate the reasons behind the varying success rates of countries in implementing economic reforms during crises. It focuses specifically on the Euro zone, using the examples of Italy in the 1990s and Ireland during the 2008-2010 financial crisis. The paper seeks to analyze the factors contributing to effective reform implementation, identifying the theoretical frameworks and practical implications.
- Economic reforms and their impact on welfare states
- The role of government behavior in crisis response
- The influence of voters' perceptions on reform success
- The application of Prospect Theory and Blame Avoidance Theory in explaining reform implementation
- Empirical analysis of Italy and Ireland as case studies
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter introduces the topic of economic reforms and their relationship to economic crises, highlighting the role of government decisions and voter perceptions. It also poses the key research question of why some countries are more successful than others in implementing reforms during crises.
- I. Theories of state reforms: This section explores two theoretical frameworks that explain the decision-making process of governments regarding economic reforms.
- 1. The Prospect Theory: This chapter discusses the Prospect Theory, developed by Kahneman and Tversky, which explores how people make decisions under conditions of risk and uncertainty. It examines the theory's core concepts, including the negativity effect, certainty effect, reflection effect, and reference point bias, and explains how these concepts can be applied to understanding government behavior during economic crises.
- 2. The Theory of Blame Avoidance: This chapter focuses on the Theory of Blame Avoidance, which proposes that governments are motivated to implement reforms to avoid electoral punishment for economic crises. It analyzes how governments respond to pressure from voters and interest groups, considering the potential consequences of reform or inaction.
- II. Empirical examples: This section presents two case studies to illustrate the practical implications of the theoretical frameworks discussed previously.
- 1. Italy in the 1990s: This chapter examines Italy's experience with economic reforms during the 1990s, analyzing the country's response to a severe economic crisis before joining the Euro zone. It highlights the factors that contributed to Italy's success in implementing reforms and overcoming the crisis.
- 2. Ireland in 2008-2010: This chapter focuses on Ireland's response to the financial crisis of 2008-2009 as a member state of the Euro zone. It explores the challenges faced by the Irish government in implementing reforms and analyzes the country's ability to recover from the crisis.
Schlüsselwörter (Keywords)
The term paper explores the key concepts of economic reforms, crisis management, political economy, prospect theory, blame avoidance, electoral support, welfare states, and the Euro zone. The case studies of Italy and Ireland provide insights into practical examples of reform implementation during economic crises.
- Quote paper
- B.A. Andrei Horlau (Author), 2013, Implementing reforms during the economic crisis, Munich, GRIN Verlag, https://www.grin.com/document/215519
