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Economic reform and progress in Latin America and the Caribbean

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  • Loayza, Norman
  • Palacios, Luisa

Abstract

In the late 1980s, after decades of poor economic management, many Latin American and Caribbean countries undertook structural reform that placed them on a path toward superior economic performance. The authors examine the experience in structural reform in five areas: governance (reforming public institutions), international trade, financial markets, labor markets, and the generation and use of public resources. To characterize the experience with structural reform in the region, they develop quantitative indicators for different types of policy reform and for their outcomes. They conclude that the most progress has been made in liberalizing international trade. In this area the region has done almost as well as the Asian newly industrialized countries (NICs). The least progress has been made in reforming labor markets. In most countries there are still severe constraints on hiring and firing workers, payroll tax rates are high, there are few or no mechanisms for resolving labor disputes, and there is too much public employment. Financial development has improved, especially the depth of financial intermediation, private sector participation in banking, and the size and activity of stock markets. As for the efficient generation and use of public resources, much has been done to make the value-added tax system efficient and to privatize public enterprises. Reform gains in governance have been modest. Latin America remains well behind the Asian NICs and OECD countries, especially regarding the rule of law (judicial and police systems) and the quality of public administration (procedural clarity and the bureaucracy's honesty and technical competence). A great deal has been accomplished, but compared with the Asian NICs and OECD countries, there is still substantial room for improvement.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1829.

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Date of creation: 01 Sep 1997
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Handle: RePEc:wbk:wbrwps:1829

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Keywords: Banks&Banking Reform; Environmental Economics&Policies; Payment Systems&Infrastructure; Labor Policies; Economic Theory&Research; Economic Theory&Research; Economic Policy; Institutions and Governance; Environmental Economics&Policies; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Banks&Banking Reform;

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References

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  1. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
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  17. Demirguc-Kunt, Asli & Levine, Ross, 1995. "Stock market development and financial intermediaries : stylized facts," Policy Research Working Paper Series 1462, The World Bank.
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Citations

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Cited by:
  1. Francisco A. Gallego & Norman Loayza, 2000. "Financial Structure in Chile: Macroeconomic Developments and Microeconomic Effects," Econometric Society World Congress 2000 Contributed Papers 1115, Econometric Society.
  2. Loayza, Norman V. & Soto, Raimundo, 2004. "On the measurement of market-oriented reforms," Policy Research Working Paper Series 3371, The World Bank.
  3. Norman Loayza & Pablo Fajnzylber & César Calderón, 2004. "Economic Growth in Latin America and The Caribbean: Stylized Facts, Explanations, and Forecasts," Working Papers Central Bank of Chile 265, Central Bank of Chile.
  4. Cole, Harold L. & Ohanian, Lee E. & Riascos, Alvaro & Schmitz, James Jr, 2005. "Latin America in the rearview mirror," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 69-107, January.
  5. Ebrima Faal, 2005. "Gdp Growth, Potential Output, and Output Gaps in Mexico," IMF Working Papers 05/93, International Monetary Fund.
  6. Lachler, Ulrich & Aschauer, David Alan, 1998. "Public investment and economic growth in Mexico," Policy Research Working Paper Series 1964, The World Bank.
  7. Mwangi S. Kimenyi, 2006. "Economic Reforms and Pro-Poor Growth: Lessons for Africa and other Developing Regions and Economies in Transition," Working papers 2006-02, University of Connecticut, Department of Economics.
  8. Andrew Downes & Nlandu Mamingi & Rose-Marie Belle Antoine, 2004. "Labor Market Regulation and Employment in the Caribbean," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 517-552 National Bureau of Economic Research, Inc.
  9. Claudio Loser & Martine Guerguil, 1999. "Trade and Trade Reform in Latin America and the Caribbean in the 1990s," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 61-96, May.

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