Resistance to Reform: Status Quo Bias in the Presence of Individual-Speci Uncertainty

Why do governments so often fail to adopt reforms that economists consider efficiency-enhancing? This is the question addressed in an influential paper by Raquel Fernandez and Dani Rodrik (1991). They argue that one of the rea-sons is that individual winners and losers of reform can often not be identified beforehand. This individual-specific uncertainty leads to a bias against reform. Before turning to their model, Fernandez and Rodrik illustrate their argument with an exam-ple. The example assumes that voters are risk neutral and that reforms need the support of a majority of the electorate. Fernandez and Ro-drik first argue that individual-specific (IS) un