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Are Complementary Reforms a 'Luxury' for Developing Countries?

Author

Listed:
  • Jorge Braga de Macedo
  • Bruno Rocha
  • Joaquim Oliveira Martins

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper investigates the impact of complementarity reforms on growth and how it depends on GDP per capita. Based on reform data for six policy areas compiled from various sources during the period 1994-2006 for over 100 countries, we compute composite indicators of reform level and complementarity. We provide qualitative justification for the existence of pair-wise complementarities among policy areas. We then use cross-section and panel data estimates to test the effect of reform level and complementarity on GDP per capita growth. We found reforms to be positively related and their dispersion (or the inverse of complementarity) negatively related to growth, controlling for initial conditions, monetary stability and other structural and institutional variables, as well as endogeneity of reform level and complementarity. We show that the effect of policy complementarity is a stronger condition for sustainable growth in developing than in advanced countries, to conclude that complementary reforms are not a 'luxury' for developing countries.

Suggested Citation

  • Jorge Braga de Macedo & Bruno Rocha & Joaquim Oliveira Martins, 2014. "Are Complementary Reforms a 'Luxury' for Developing Countries?," Post-Print hal-01618204, HAL.
  • Handle: RePEc:hal:journl:hal-01618204
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01618204
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    References listed on IDEAS

    as
    1. Chang, Roberto & Kaltani, Linda & Loayza, Norman V., 2009. "Openness can be good for growth: The role of policy complementarities," Journal of Development Economics, Elsevier, vol. 90(1), pages 33-49, September.
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    11. 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.
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    Cited by:

    1. Jorge Braga de Macedo & Luís Brites Pereira, 2014. "Cape Verde and Mozambique as Development Successes in West and Southern Africa," NBER Chapters,in: African Successes, Volume IV: Sustainable Growth, pages 203-293 National Bureau of Economic Research, Inc.
    2. Nauro F. Campos & Paul De Grauwe & Yuemei Ji, 2017. "Structural Reforms, Growth and Inequality: An Overview of Theory, Measurement and Evidence," CESifo Working Paper Series 6812, CESifo Group Munich.

    More about this item

    Keywords

    Developing Countries; GDP; Growth; Policy;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - 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
    • P41 - Economic Systems - - Other Economic Systems - - - Planning, Coordination, and Reform

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