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Does reform work? An econometric examination of the reform-growth puzzle

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Author Info
Babetskii, Ian (BOFIT)
Campos, Nauro F. () (BOFIT)

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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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Publisher Info
Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 13/2007.

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Length: 45 pages
Date of creation: 26 Jun 2007
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Handle: RePEc:hhs:bofitp:2007_013

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
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Related research
Keywords: structural reforms economic growth transition meta-analysis

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Find related papers by JEL classification:
C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Nauro F. Campos & Roman Horváth, 2006. "Reform Redux: Measurement, Determinants and Reversals," Working Papers IES 2006/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006. [Downloadable!]
    Other versions:
  2. Clifford Zinnes & Yair Eilat & Jeffrey Sachs, 2001. "The Gains from Privatization in Transition Economies: Is "Change of Ownership" Enough?," IMF Staff Papers, Palgrave Macmillan Journals, vol. 48(4), pages 7. [Downloadable!] (restricted)
  3. Ekkehard Ernst & Gang Gong & Willi Semmler & Lina Bukeviciute, 2006. "Quantifying the impact of structural reforms," Working Paper Series 666, European Central Bank. [Downloadable!]
  4. Orley Ashenfelter & Colm Harmon & Hessel Oosterbeek, 1999. "A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias," Working Papers 804, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  5. Scott Rozelle & Johan F. M. Swinnen, 2004. "Success and Failure of Reform: Insights from the Transition of Agriculture," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 404-456, June. [Downloadable!] (restricted)
  6. 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 470, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  7. Stanley, T D & Jarrell, Stephen B, 1989. " Meta-Regression Analysis: A Quantitative Method of Literature Survey s," Journal of Economic Surveys, Blackwell Publishing, vol. 3(2), pages 161-70.
    Other versions:
  8. Egert, Balazs & Halpern, Laszlo, 2006. "Equilibrium exchange rates in Central and Eastern Europe: A meta-regression analysis," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1359-1374, May. [Downloadable!] (restricted)
    Other versions:
  9. Ian Babetskii & Nauro F. Campos, 2007. "Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle," IZA Discussion Papers 2638, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. T. D. Stanley, 2001. "Wheat from Chaff: Meta-analysis as Quantitative Literature Review," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 131-150, Summer. [Downloadable!] (restricted)
  11. Oleh Havrylyshyn, 2001. "Recovery and Growth in Transition: A Decade of Evidence," IMF Staff Papers, Palgrave Macmillan Journals, vol. 48(4), pages 4. [Downloadable!] (restricted)
  12. repec:att:wimass:1920418 is not listed on IDEAS
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  14. Andrew Rose, 2004. "A Meta-Analysis of the Effect of Common Currencies on International Trade," NBER Working Papers 10373, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Doris Weichselbaumer & Rudolf Winter-Ebmer, 2007. "The effects of competition and equal treatment laws on gender wage differentials," Economic Policy, CEPR, CES, MSH, vol. 22, pages 235-287, 04. [Downloadable!] (restricted)
  16. Chris Doucouliagos, 1995. "Worker participation and productivity in labor-managed and participatory capitalist firms: A meta-analysis," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 49(1), pages 58-77, October.
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  18. Raymond J.G.M. Florax & Henri L.F. de Groot & Ruud A. de Mooij, 2002. "Meta-analysis: A Tool for Upgrading Inputs of Macroeconomic Policy Models," Tinbergen Institute Discussion Papers 02-041/3, Tinbergen Institute. [Downloadable!]
  19. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September. [Downloadable!] (restricted)
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  20. William L. Megginson & Jeffry M. Netter, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June. [Downloadable!] (restricted)
  21. Stephen B. Jarrell & T. D. Stanley, 1990. "A meta-analysis of the union-nonunion wage gap," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 44(1), pages 54-67, October.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Babetskii, Ian & Campos, Nauro F., 2007. "Does reform work? An econometric examination of the reform-growth puzzle," BOFIT Discussion Papers 13/2007, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
    Other versions:
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