Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle

Ian Babetskii () and Nauro Campos
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Ian Babetskii: Czech National Bank
Authors registered in the RePEc Author Service: Jan Babecký

No 2638, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Why are socially beneficial reforms not implemented? One simple answer to this question (which has received little attention in the literature) is that this may be caused by generalized uncertainty about the effectiveness of reforms. If agents are unsure about whether a proposed reform will work, it will be less likely to be adopted. Despite the numerous benefits economists assign to structural reforms, the empirical literature has thus far failed to establish a positive and significant effect of reforms on economic performance. We collect data from 43 econometric studies (for more than 300 coefficients on the effects of reform on growth) and show that approximately one third of these coefficients is positive and significant, another third is negative and significant, and the final third is not statistically significant different from zero. In trying to understand this remarkable variation, we find that the measurement of reform and controlling for institutions and initial conditions are main factors in decreasing the probability of reporting a significant and positive effect of reform on growth.

Keywords: economic growth; structural reforms (search for similar items in EconPapers)
JEL-codes: C49 O11 P21 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2007-02
New Economics Papers: this item is included in nep-dev and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published - published in: Journal of Comparative Economics, 2011, 39 (2), 140-158

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Related works:
Working Paper: Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle (2007)
Working Paper: Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle (2007)
Working Paper: Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle (2007)
Working Paper: Does reform work? An econometric examination of the reform-growth puzzle (2007)
Working Paper: Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle (2006)
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