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Fernandez Rodrik (1991) - Resistance To Reform Status Quo Bias In The Presence Of Individual Specific Uncertainty (view source)
Revision as of 03:59, 8 March 2011
, 03:59, 8 March 2011→The Model
The paper studies the choice of workers to invest in changing sectors. Part of their costs of changing sectors is fixed and known. The other part is private and unknown: Ex-ante, workers only know the distribution of types but not their own location within the distribution. As such, they act as if their own cost is the mean of the distribution.
In these circumstances, situations may arise in which a majority of workers oppose legislation that would require them to change sectors (such as trade liberalization, the motivating example of this paper) and instead favor the status quo. However should the legislation pass anyway, the workers would find out where they stand in the distribution. Some portion of workers who changed would then realize that the new legislation is actually better for them than the old status quo and would therefore resist efforts to repeal the law and revert to the old status quo.
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