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Big reforms, big returns? Evidence from structural reform shocks

Author

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  • Terzi, Alessio
  • Marrazzo, Marco Pasquale

Abstract

Following a series of disappointing outcomes in Latin America and Sub-Saharan Africa, traditional structural reform shocks, of the type advocated under the ‘Washington Consensus’, came to be widely viewed as unsuccessful. This paper revisits that conclusion by applying a novel generalised use of the non-parametric Synthetic Control Method with multiple treated units to estimate the impact of 23 policy reform shocks (spanning both real and financial sector measures) implemented globally between 1961 and 2000. Our results suggest that, notwithstanding a muted short-term impact, wide-reaching reforms on average raised GDP per capita by around 6 percentage points over a decade. These findings are robust across alternative specifications, placebo and falsification tests, and different reform indicators. While outcomes were heterogeneous, the results indicate that broad liberalising reforms have more often than not delivered medium-term growth improvements, underscoring the importance of understanding the conditions under which they succeed.

Suggested Citation

  • Terzi, Alessio & Marrazzo, Marco Pasquale, 2026. "Big reforms, big returns? Evidence from structural reform shocks," Economic Modelling, Elsevier, vol. 158(C).
    • Handle: RePEc:eee:ecmode:v:158:y:2026:i:c:s0264999326000131
    DOI: 10.1016/j.econmod.2026.107484
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    Keywords

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    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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