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Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle

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  • Ian Babetskii
  • Nauro F. Campos

Abstract

Despite the many benefits associated with structural reforms, the literature has thus far failed to establish a positive significant effect of reforms on growth. Using data from 43 econometric studies, we show that one third of the coefficients (of reform on growth) are positive and significant, another third are negative and significant, and the final third are not statistically significant. In trying to understand this remarkable variation, we find that the measurement of reform and controlling for institutions and initial conditions are the main factors in decreasing the probability of reporting a significant and positive effect of reform on growth.

Suggested Citation

  • Ian Babetskii & Nauro F. Campos, 2007. "Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle," Working Papers 2007/2, Czech National Bank, Research Department.
    • Handle: RePEc:cnb:wpaper:2007/2
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    Cited by:

    1. Aghion, Philippe & Askenazy, Philippe & Bourlès, Renaud & Cette, Gilbert & Dromel, Nicolas, 2009. "Education, market rigidities and growth," Economics Letters, Elsevier, vol. 102(1), pages 62-65, January.
    2. Fidrmuc, Jan & Tichit, Ariane, 2009. "Mind the break! Accounting for changing patterns of growth during transition," Economic Systems, Elsevier, vol. 33(2), pages 138-154, June.
    3. Stankov, Petar, 2010. "Deregulation, economic growth and growth acceleration," MPRA Paper 26485, University Library of Munich, Germany.
    4. Campos, Nauro F & Horváth, Roman, 2006. "Reform Redux: Measurement, Determinants and Reversals," IZA Discussion Papers 2093, Institute for the Study of Labor (IZA).
    5. Ian Babetskii & Nauro Campos, 2006. "Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle," William Davidson Institute Working Papers Series wp870, William Davidson Institute at the University of Michigan.
    6. Fabrizio Coricelli & Mathilde Maurel, 2011. "Growth and Crisis in Transition: A Comparative Perspective," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 49-64, February.
    7. Artur Radziwill & Pawel Smietanka, 2009. "EU's Eastern Neighbours: Institutional Harmonisation and Potential Growth Bonus," CASE Network Studies and Analyses 0386, CASE-Center for Social and Economic Research.
    8. Horváthová, Eva, 2010. "Does environmental performance affect financial performance? A meta-analysis," Ecological Economics, Elsevier, vol. 70(1), pages 52-59, November.
    9. Oleh Havrylyshyn, 2008. "Growth Recovery in CIS Countries: The Sufficient Minimum Threshold of Reforms," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 50(1), pages 53-78, March.
    10. Martina Basarac Sertic & Anita Ceh Casni & Valentina Vuckovic, 2015. "Impact of labour market reforms on economic activity in European Union: short term costs and long term benefits," Financial Theory and Practice, Institute of Public Finance, vol. 39(1), pages 83-107.
    11. Katarzyna Metelska-Szaniawska, 2009. "Constitutions and economic reforms in transition: an empirical study," Constitutional Political Economy, Springer, vol. 20(1), pages 1-41, March.
    12. Gilbert Cette & Yusuf Kocoglu & Jacques Mairesse, 2009. "Productivity Growth and Levels in France, Japan, the United Kingdom and the United States in the Twentieth Century," NBER Working Papers 15577, National Bureau of Economic Research, Inc.
    13. Regis Bonelli, 2009. "Estado de uma Nação: Textos de Apoio - Estado e Economia: Estado e E Crescimento Econômico no Brasil," Discussion Papers 1393, Instituto de Pesquisa Econômica Aplicada - IPEA.
    14. Pääkkönen, Jenni, 2010. "Economic freedom as driver of growth in transition," Economic Systems, Elsevier, vol. 34(4), pages 469-479, December.
    15. Philippe Aghion & Philippe Askenazy & Renaud Bourlès & Gilbert Cette & Nicolas Dromel, 2008. "Distance à la frontière technologique, rigidités de marché, éducation et croissance," Économie et Statistique, Programme National Persée, vol. 419(1), pages 11-30.
    16. Kosta Josifidis & Radmila Dragutinović Mitrović & Olgica Ivančev, 2012. "Heterogeneity of Growth in the West Balkans and Emerging Europe: A Dynamic Panel Data Model Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(2), pages 157-183, May.
    17. Igor Pelipas & Alexander Chubrik, 2008. "Market Reforms and Growth in Post-socialist Economies: Evidence from Panel Cointegration and Equilibrium Correction Model," William Davidson Institute Working Papers Series wp936, William Davidson Institute at the University of Michigan.
    18. Katarzyna Metelska-Szaniawska, 2015. "Economic Effects of Post-Socialist Constitutions Revisited (nearly) 25 Years from the Outset of Transition," Working Papers 2015-33, Faculty of Economic Sciences, University of Warsaw.
    19. Barrios, Salvador & Burgelman, Jean-Claude, 2007. "Information and Communication Technologies, Market Rigidities and Growth: Implications for EU Policies," MPRA Paper 5838, University Library of Munich, Germany.
    20. Oleh Havrylyshyn, 2015. "A quarter century of economic reforms in Ukraine: too late, too slow, too little / Æwieræ wieku ukraiñskich reform: za ma³o, za póŸno i zbyt wolno," mBank - CASE Seminar Proceedings 135, CASE-Center for Social and Economic Research.

    More about this item

    Keywords

    Growth; liberalisation; structural reforms; transition.;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other

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