The Inverse Domino Effect: Are Economic Reforms Contagious?
AbstractThis paper examines whether a country's economic reform are affected by reforms adopted by other countries. A simple model of economic reforms is developed to motivate the econometric work. Unsurprisingly, the model predicts that reforms are more likely when factors of production are internationally mobile and reforms are pursued in other economies. More interesting is the finding that reforms are not driven by greater trade openness. Using the change in the Index of Economic Freedom as the measure of market-liberalising reforms, we examine two issues. Using data for the a panel of 144 countries and the years 1995-2006, we identify the most important channels through which reforms are transmitted from country to country. We find evidence of the importance of reforms in other countries. Moreover, consistent with our model, international trade is not a vehicle for the diffusion of economic reforms, rather the most important mechanism is geographical or cultural proximity.
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Bibliographic InfoPaper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 08-187.
Length: 29 pages
Date of creation: Feb 2008
Date of revision:
Economic reforms; economic freedom; resource flow models; spatial interdependence;
Other versions of this item:
- Martin Gassebner & Noel Gaston & Michael J. Lamla, 2011. "The Inverse Domino Effect: Are Economic Reforms Contagious?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 183-200, 02.
- Martin Gassebner & Noel Gaston & Michael Lamla, 2007. "The Inverse Domino Effect: Are Economic Reforms Contagious?," Development Research Unit Working Paper Series 31-07, Monash University, Department of Economics.
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-04 (All new papers)
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