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Can Reform Waves Turn the Tide? Some Case Studies using the Synthetic Control Method

Author

Listed:
  • Bibek Adhikari

    (Illinois State University)

  • Romain Duval

    (International Monetary Fund)

  • Bingjie Hu

    (World Bank Group)

  • Prakash Loungani

    (International Monetary Fund)

Abstract

A number of advanced economies carried out a sequence of extensive reforms of their labor and product markets in the 1990s and early 2000s. Using the Synthetic Control Method (SCM), this paper implements six case studies of well-known waves of reforms, those of New Zealand, Australia, Denmark, Ireland and Netherlands in the 1990s, and the labor market reforms in Germany in the early 2000s. In four of the six cases, GDP per capita was higher than in the control group as a result of the reforms. No difference between the treated country and its synthetic counterpart could be found in the cases of Denmark and New Zealand, which in the latter case may have partly reflected the implementation of reforms under particularly weak macroeconomic conditions. Overall, also factoring in the limitations of the SCM in this context, the results are suggestive of a positive but heterogenous effect of reform waves on GDP per capita.

Suggested Citation

  • Bibek Adhikari & Romain Duval & Bingjie Hu & Prakash Loungani, 2018. "Can Reform Waves Turn the Tide? Some Case Studies using the Synthetic Control Method," Open Economies Review, Springer, vol. 29(4), pages 879-910, September.
    • Handle: RePEc:kap:openec:v:29:y:2018:i:4:d:10.1007_s11079-018-9490-3
    DOI: 10.1007/s11079-018-9490-3
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    11. Campos, Nauro F. & De Grauwe, Paul & Ji, Yuemei, 2023. "Structural reforms and economic performance: the experience of advanced economies," LSE Research Online Documents on Economics 120870, London School of Economics and Political Science, LSE Library.
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    More about this item

    Keywords

    Structural reforms; Synthetic control method; Liberalization; Labor and productivity market reforms; Growth;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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