| Summary: | This thesis studies the role of incentives and beliefs in changes in economic policies and institutions, particularly during economic transitions. We motivate our work by providing a review of the literature on post-communist economic transitions in the introductory chapter. In Chapter 2, we outline the methodological strategies used in the thesis. In the subsequent chapters, this broad research agenda is translated into three self-contained research projects, which study different attributes of cognitive and incentive problems arising in processes of institutional change. Chapter 3 uses the idea of policy credibility to explain the persistence of food and energy subsidies in Egypt and provides a discussion of how appropriate reform design can help overcome the lack of credibility. Chapter 4 outlines a rational choice-based explanation for the rise of political Islam in the Middle East. The explanation revolves around the claim that religious political groups are able to address the problem of credible commitment, ubiquitous in new and emerging democracies. Chapter 5 studies the role of cognitive constraints in shaping transitional outcomes, with a focus on post- communist Czechoslovakia. Besides presenting evidence for systematic differences in beliefs between the Czechs and the Slovaks, it argues that measurable differences in market attitudes affected policy choices in both countries and led to different transitional outcomes. Chapter 6 concludes.
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