We examine the effect of regime change on privatization using the 2004 election surprise in India. The pro-reform BJP was unexpectedly defeated by a less reformist coalition. Stock prices of government-controlled companies that had been slated for definite privatization by the BJP dropped by 3.5 percent relative to private firms. Surprisingly, government-controlled companies that were only under study for possible privatization fell by 7.5 percent relative to private firms. We interpret this as evidence of investor belief of policy irreversibility, where reforms may reach a stage beyond which future regimes have difficulty reversing those policies. Further analysis suggests that layoffs, combined with the privatization announcement, served as a credible commitment to the government's privatization agenda.

No abstract

We examine the effect of regime change on privatization using the 2004 election surprise in India. The pro-reform BJP was unexpectedly defeated by a less reformist coalition. Stock prices of government-controlled companies that had been slated for definite privatization by the BJP dropped by 3.5 percent relative to private firms. Surprisingly, government-controlled companies that were only under study for possible privatization fell by 7.5 percent relative to private firms. We interpret this as evidence of investor belief of policy irreversibility, where reforms may reach a stage beyond which future regimes have difficulty reversing those policies. Further analysis suggests that layoffs, combined with the privatization announcement, served as a credible commitment to the government's privatization agenda.

Around the world pension reforms and a shift in pension risk toward employees have made plan members more responsible for saving and investing for retirement. Governments call for increasing financial literacy and pension awareness of citizens to help them prepare adequately for retirement. They stress that pension communication and information should be made better accessible, more targeted, and easier to understand. Behavioural economists argue that pension communication and information are much less effectiveif effective at allin changing behaviour than defaults and mandatory active choice. This paper contributes to this debate. Using the Netherlands as a case study, we present empirical evidence indicating that even the most simple, targeted and accessible information has very little effect on behaviour. We find that the effect of information is even smaller for low-income groups. We discuss policy implications.

No abstract