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Growth, reform indicators and policy complementarities1

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  • Jorge Braga De Macedo
  • Joaquim Oliveira Martins

Abstract

In order to assess the growth implications of policy complementarities, this paper applies second‐best results to reform indicators. During the transition from central planning to EU integration, which corresponds to a policy cycle, a complementarity index based on structural indicators compiled by the European Bank for Reconstruction and Development (EBRD) decreases and then increases while the level of reforms tends to rise throughout. Corrected for initial conditions, the extent of macroeconomic stabilization and endogeneity, the level of reforms and changes in their complementarity are found to be positively related to output growth. The study uses panel data for 27 countries between 1989 and 2004.

Suggested Citation

  • Jorge Braga De Macedo & Joaquim Oliveira Martins, 2008. "Growth, reform indicators and policy complementarities1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(2), pages 141-164, April.
  • Handle: RePEc:bla:etrans:v:16:y:2008:i:2:p:141-164
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    File URL: https://doi.org/10.1111/j.1468-0351.2008.00323.x
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    References listed on IDEAS

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    1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    2. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
    3. Rabah Amir, 2005. "Supermodularity and Complementarity in Economics: An Elementary Survey," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 636-660, January.
    4. Kawamata, Kunio, 1974. "Price Distortion and Potential Welfare," Econometrica, Econometric Society, vol. 42(3), pages 435-460, May.
    5. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 879-907.
    6. Michela Nardo & Michaela Saisana & Andrea Saltelli & Stefano Tarantola & Anders Hoffman & Enrico Giovannini, 2005. "Handbook on Constructing Composite Indicators: Methodology and User Guide," OECD Statistics Working Papers 2005/3, OECD Publishing.
    7. Ricardo Hausmann & Bailey Klinger, 2008. "Growth Diagnostics: Perú," Research Department Publications 2005, Inter-American Development Bank, Research Department.
    8. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 11-32.
    9. Daron Acemoglu, 2007. "Equilibrium Bias of Technology," Econometrica, Econometric Society, vol. 75(5), pages 1371-1409, September.
    10. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-528, June.
    11. Amable, Bruno, 2003. "The Diversity of Modern Capitalism," OUP Catalogue, Oxford University Press, number 9780199261147.
    12. Ricardo Hausmann & Bailey Klinger, 2008. "Growth Diagnostics: Perú," Research Department Publications 2005, Inter-American Development Bank, Research Department.
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    More about this item

    JEL classification:

    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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