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

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  • Ian Babetskii
  • Nauro F. Campos

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 generalised 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.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp322.

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Date of creation: Mar 2007
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Handle: RePEc:cer:papers:wp322

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Keywords: Meta-regression analysis; reform; growth.;

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  1. Card, David & Krueger, Alan B, 1995. "Time-Series Minimum-Wage Studies: A Meta-analysis," American Economic Review, American Economic Association, American Economic Association, vol. 85(2), pages 238-43, May.
  2. Campos, Nauro F & Horváth, Roman, 2006. "Reform Redux: Measurement, Determinants and Reversals," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5673, C.E.P.R. Discussion Papers.
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  4. Ian Babetskii & Nauro F. Campos, 2007. "Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle," Working Papers, Czech National Bank, Research Department 2007/2, Czech National Bank, Research Department.
  5. Nauro F. Campos & Fabrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 470, William Davidson Institute at the University of Michigan.
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  23. repec:fth:prinin:425 is not listed on IDEAS
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