Abstract:

Governments of developed countries increasingly face domestic and international pressures to reform their protected sectors. In a comparative study of Japanese and Swedish agricultural sectors, this research examines how economic conditions, interest group coalitions and international pressure affect a country's choice of market reform. Specifically, it asks why Japan and Sweden underwent radically different agricultural market reforms despite their long history of protectionist policies, strong farm interests and similar socio-economic conditions. This research finds that developed countries embark on one of three types of reform--marginal, targeted and comprehensive--depending on the ability of domestic interest groups to form a broad coalition in favor of reform and the strength of international trade negotiations. In the agricultural sector, strong domestic pressure generated by a business-labor coalition leads to the most comprehensive reform. Business-labor coalitions form in countries with cohesive labor in response to high inflation and budget deficit. When interest groups are fragmented, countries embark on smaller changes--either marginal or targeted reform--depending on the strength of international trade negotiations. In conclusion, this research finds that while strong domestic pressure leads to more radical changes than international pressure, it is also more likely to lead to policy reversals.