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What drives liberal policies in developing countries?

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  • Vatcharin Sirimaneetham

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Abstract

This paper investigates why governments in some developing countries have adopted more liberal policies than others. To construct a composite policy index, the paper applies a robust principal components analysis to Washington Consensus policy variables. The paper shows that income growth is higher in countries with more liberal policies. Using a Bayesian approach which addresses the model uncertainty problem, this study finds that government policies are more liberal in countries which possess right-wing or centrist governments, have greater political stability, and are former Spanish colonies. In contrast, countries which are less ethnically diverse, are former French colonies, and have a military leader tend to implement less liberal policies.

Suggested Citation

  • Vatcharin Sirimaneetham, 2006. "What drives liberal policies in developing countries?," Bristol Economics Discussion Papers 06/587, Department of Economics, University of Bristol, UK.
  • Handle: RePEc:bri:uobdis:06/587
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    More about this item

    Keywords

    liberal policy; economic freedom; economic growth; Bayesian model averaging; principal components;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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