The Political Economy of Economic Policy Advice
Dercon S.
This article examines the political economy of economic policy advice. It offers a framework for assessing how to maximise the economic development impact of advice, allowing for the political incentives of those in power. It argues for a ‘second best’ analysis that looks to maximise development impact given political incentives and shows how standard advice often given by researchers, government advisors or international organisations such as the World Bank and the IMF may not be this second best option. Furthermore, it looks at the implications of treating political constraints as endogenous. Some examples illustrate how research and advice can be more impactful by considering local political economy conditions.