## Political Feasibility and Investment in Economic Transformations

_IMF Working Papers, July 1, 1993_

## Source details

**Canonical URL:** [Political Feasibility and Investment in Economic Transformations](https://www.imf.org/en/publications/wp/issues/2016/12/30/political-feasibility-and-investment-in-economic-transformations-736)

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## Bibliographic details
- Authors: Peter Isard, Joshua Aizenman
- Published: July 1, 1993
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451967289.001

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### Analytical framework
- Feasibility of economic transformation requires the simultaneous attainment of:
  - Macroeconomic stability, defined as fiscal balance.
  - Political support, related to the income gains and losses of different population groups.
  - Adequate private investment, which is linked to public “infrastructure” investment.
- The analysis emphasizes interactions among fiscal policy, distributional effects across population groups, and public infrastructure’s role in mobilizing private investment.
- Productivity gains arise when workers are induced to make occupational choices consistent with their comparative advantages.

### Key findings
- Successful economic transformation depends on meeting multiple requirements concurrently (macroeconomic stability, political feasibility, and private investment).
- Public “infrastructure” investment is a crucial determinant of private investment levels.
- Political feasibility hinges on the distributional income effects of transformation policies across different population groups.
- Achieving the simultaneous requirements may necessitate a “big push” involving external financial and technical assistance.
- Inducing occupational choices aligned with comparative advantage yields important productivity gains.

### Policy implications and recommendations
- Ensure fiscal balance to maintain macroeconomic stability as a foundation for transformation efforts.
- Design transformation policies with explicit attention to the income gains and losses across population groups to build political support.
- Use public infrastructure investment strategically to catalyze adequate private investment.
- Consider coordinated external financial and technical assistance—a “big push”—when domestic resources and political conditions alone are insufficient to attain simultaneous requirements.
- Implement policies that facilitate workers’ movement toward occupations consistent with their comparative advantages to capture productivity improvements.

*Source: Political Feasibility and Investment in Economic Transformations, Peter Isard and Joshua Aizenman.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/political-feasibility-and-investment-in-economic-transformations-736_