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Structural policies and growth: Time series evidence from a natural experiment

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  • Eicher, Theo S.
  • Schreiber, Till

Abstract

Documenting the long term impact of structural policies on economic performance has generated tremendous interest in the development literature. In contrast, contemporary effects of structural policies are difficult to establish. Structural policies seldom change sufficiently in the short run, and accepted instruments to control for endogeneity in cross sections are inappropriate for time series analysis. In this paper we utilize an eleven year panel of 26 transition countries to identify short term effects of structural policies that are large and significant. A ten percent change in the quality of structural policies (or the Rule of Law) towards OECD standards is shown to raise annual growth by about 2.5%. To control for endogeneity, we develop an instrument using the hierarchy of institutions hypothesis and find that it holds a robust explanatory power. We also document that early reformers reap the greatest benefits, but that it is never too late to begin structural policy reforms.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 91 (2010)
Issue (Month): 1 (January)
Pages: 169-179

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Handle: RePEc:eee:deveco:v:91:y:2010:i:1:p:169-179

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Keywords: Structural policies Growth Dynamic panel Transition economies;

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Cited by:
  1. Jan Babecky & Tomas Havranek, 2014. "Structural reforms and growth in transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 22(1), pages 13-42, 01.
  2. Marta Spreafico, 2013. "Institutions, the resource curse and the transition economies: further evidence," DISCE - Quaderni dell'Istituto di Politica Economica ispe0064, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  3. Leon Podkaminer, 2013. "Development Patterns of Central and East European Countries (in the course of transition and following EU accession)," wiiw Research Reports 388, The Vienna Institute for International Economic Studies, wiiw.
  4. Andreas Assiotis & Kevin Sylwester, 2013. "Do Good Institutions Lower the Benefit of Democratization?," University of Cyprus Working Papers in Economics 05-2013, University of Cyprus Department of Economics.
  5. Pal, Sarmistha, 2013. "Corruption, Networking and Foreign Ownership: Recent Evidence from CEE Countries," IZA Discussion Papers 7636, Institute for the Study of Labor (IZA).
  6. Coricelli, Fabrizio & Driffield, Nigel & Pal, Sarmistha & Roland, Isabelle, 2012. "When does leverage hurt productivity growth? A firm-level analysis," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1674-1694.
  7. Jan Babecky & Tomas Havranek, 2013. "Structural Reforms and Growth in Transition: A Meta-Analysis," William Davidson Institute Working Papers Series wp1057, William Davidson Institute at the University of Michigan.
  8. Tamilina, Larysa & Tamilina, Natalya, 2012. "When formal institutions fail in fostering economic growth: the case of post-communist countries," MPRA Paper 48352, University Library of Munich, Germany, revised 01 Nov 2012.
  9. Oliver Röhn & Sultan Orazbayev & Aslan Sarinzhipov, 2009. "An Institutional Risk Analysis of the Kazakh Economy," Ifo Working Paper Series Ifo Working Paper No. 70, Ifo Institute for Economic Research at the University of Munich.
  10. Muravyev, Alexander & Oshchepkov, Aleksey, 2013. "Minimum Wages, Unemployment and Informality: Evidence from Panel Data on Russian Regions," IZA Discussion Papers 7878, Institute for the Study of Labor (IZA).
  11. Cingolani, Luciana & Crombrugghe, Denis de, 2012. "Techniques for dealing with reverse causality between institutions and economic performance," MERIT Working Papers 034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  12. Jan Babecky & Tomas Havranek, 2013. "Structural Reforms and Economic Growth: A Meta-Analysis," Working Papers 2013/08, Czech National Bank, Research Department.
  13. Tamilina, Larysa & Baklanova, Olena, 2012. "Способы формирования контрактных институтов: эволюция versus революция
    [Means of institutional formation: evolution versus revolution]
    ," MPRA Paper 50172, University Library of Munich, Germany.
  14. Tamilina, Larysa & Baklanova, Olena, 2012. "Способы формирования контрактных институтов как факторы экономического ростa: сравнительный анализ
    [Means of e
    ," MPRA Paper 50171, University Library of Munich, Germany.
  15. Peter Sanfey & Simone Zeh, 2012. "Making sense of competitiveness indicators in south-eastern Europe," Working Papers 145, European Bank for Reconstruction and Development, Office of the Chief Economist.
  16. Christiansen, Lone & Schindler, Martin & Tressel, Thierry, 2013. "Growth and structural reforms: A new assessment," Journal of International Economics, Elsevier, vol. 89(2), pages 347-356.
  17. Driffield, Nigel L. & Mickiewicz, Tomasz & Temouri, Yama, 2013. "Institutional reforms, productivity and profitability: From rents to competition?," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 583-600.
  18. Efendic, Adnan & Pugh, Geoff & Adnett, Nick, 2011. "Institutions and economic performance: A meta-regression analysis," European Journal of Political Economy, Elsevier, vol. 27(3), pages 586-599, September.

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