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Economic reform and progress in Latin America and the Caribbean

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  • Loayza, Norman
  • Palacios, Luisa

Abstract

In the late 1980s, after decades of poor economic management, many Latin American and Caribbean countries undertook structural reform that placed them on a path toward superior economic performance. The authors examine the experience in structural reform in five areas: governance (reforming public institutions), international trade, financial markets, labor markets, and the generation and use of public resources. To characterize the experience with structural reform in the region, they develop quantitative indicators for different types of policy reform and for their outcomes. They conclude that the most progress has been made in liberalizing international trade. In this area the region has done almost as well as the Asian newly industrialized countries (NICs). The least progress has been made in reforming labor markets. In most countries there are still severe constraints on hiring and firing workers, payroll tax rates are high, there are few or no mechanisms for resolving labor disputes, and there is too much public employment. Financial development has improved, especially the depth of financial intermediation, private sector participation in banking, and the size and activity of stock markets. As for the efficient generation and use of public resources, much has been done to make the value-added tax system efficient and to privatize public enterprises. Reform gains in governance have been modest. Latin America remains well behind the Asian NICs and OECD countries, especially regarding the rule of law (judicial and police systems) and the quality of public administration (procedural clarity and the bureaucracy's honesty and technical competence). A great deal has been accomplished, but compared with the Asian NICs and OECD countries, there is still substantial room for improvement.

Suggested Citation

  • Loayza, Norman & Palacios, Luisa, 1997. "Economic reform and progress in Latin America and the Caribbean," Policy Research Working Paper Series 1829, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1829
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Harold L. Cole & Lee E. Ohanian & Alvaro Riascos & James A. Schmitz, 2006. "Latin America in the rearview mirror," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sep.
    2. Francisco Gallego Y. & Norman Loayza., 2000. "Financial Structure in Chile: Macroeconomic Developments and Microeconomic Effects," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 3(2), pages 5-30, August.
    3. Loayza, Norman V. & Soto, Raimundo, 2004. "On the measurement of market-oriented reforms," Policy Research Working Paper Series 3371, The World Bank.
    4. Norman Loayza & Pablo Fajnzylber & César Calderón, 2005. "Economic Growth in Latin America and the Caribbean : Stylized Facts, Explanations, and Forecasts," World Bank Publications, The World Bank, number 7315, April.
    5. Ebrima A Faal, 2005. "GDP Growth, Potential Output, and Output Gaps in Mexico," IMF Working Papers 05/93, International Monetary Fund.
    6. Andrew Downes & Nlandu Mamingi & Rose-Marie Belle Antoine, 2004. "Labor Market Regulation and Employment in the Caribbean," NBER Chapters,in: Law and Employment: Lessons from Latin America and the Caribbean, pages 517-552 National Bureau of Economic Research, Inc.
    7. Mwangi S. Kimenyi, 2006. "Economic Reforms and Pro-Poor Growth: Lessons for Africa and other Developing Regions and Economies in Transition," Working papers 2006-02, University of Connecticut, Department of Economics.
    8. Claudio Loser & Martine Guerguil, 1999. "Trade and Trade Reform in Latin America and the Caribbean in the 1990s," Journal of Applied Economics, Universidad del CEMA, vol. 2, pages 61-96, May.
    9. Cubas, German, 2016. "Distortions, infrastructure, and female labor supply in developing countries," European Economic Review, Elsevier, vol. 87(C), pages 194-215.
    10. Lachler, Ulrich & Aschauer, David Alan, 1998. "Public investment and economic growth in Mexico," Policy Research Working Paper Series 1964, The World Bank.
    11. Andrew S. Downes & Nlandu Mamingi & Rose-Marie Belle Antoine, 2000. "Labor Market Regulation and Employment in the Caribbean," IDB Publications (Working Papers) 3261, Inter-American Development Bank.

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