%0 Unpublished work %T Do this or do that? A model to prioritize reforms %+ Paris School of Economics (PSE) %+ Paris Jourdan Sciences Economiques (PJSE) %A Camacho, Carmen %A Tepper, Hannes %Z PSE Working Papers n°2023-10 %P 35 p. %8 2023-02-27 %D 2023 %K Reform %K Economic policy %K Structural change %K General equilibrium reform %Z Humanities and Social Sciences %Z Humanities and Social Sciences/Economics and FinancePreprints, Working Papers, ... %X This paper aims to fill the methodological gap in development economics that until now there exists no quantitative tool that allows to prioritize reforms in a systematic nor optimal way. Following the recent debate on the issues Randomized Control Trials (RCTs) have with establishing external validity and general equilibrium effects, this paper proposes a micro-founded Growth Diagnostics framework to consider general equilibrium effects and prioritize policy prescriptions. Contrarily to Hausmann et al. (2005), we set up two continous-time Overlapping Generations (OLG) models to account for the different net-marginal valuations of various economic activities rigorously. We solve the household and planner problem to respectively obtain the private and social net-marginal valuations of economic activities via the corresponding Lagrange multipliers. With these in hand, we define the wedges in the net-marginal private and social valuations to set up a new planner problem (we call super policy maker problem), where the planner minimizes the sum of wedges. This final wrapping optimization problem allows to prioritize optimally economic reforms in a second-best framework, thus, to put it in the words of Rodrik (2010), to first diagnose before one prescribes the remedy. %G English %2 https://shs.hal.science/halshs-04005785/document %2 https://shs.hal.science/halshs-04005785/file/wp_202310_.pdf %L halshs-04005785 %U https://shs.hal.science/halshs-04005785 %~ SHS %~ UNIV-PARIS1 %~ ENS-PARIS %~ ENPC %~ PJSE %~ PSE %~ CNRS %~ EHESS %~ AO-ECONOMIE %~ PARISTECH %~ PJSE_WP %~ PREPRINT %~ PSL %~ PSE_WP %~ INRAE %~ ENS-PSL %~ ANR %~ RESEAU-EAU