Skip to main content Accessibility help
×
Hostname: page-component-586b7cd67f-l7hp2 Total loading time: 0 Render date: 2024-11-29T18:17:20.788Z Has data issue: false hasContentIssue false

2 - Structural Reforms and Growth

The Elusive Quest for the Silver Bullet

from Part I - Economic Growth and Structural Reforms in Europe

Published online by Cambridge University Press:  31 March 2020

Nauro F. Campos
Affiliation:
University College London
Paul De Grauwe
Affiliation:
London School of Economics and Political Science
Yuemei Ji
Affiliation:
University College London
Get access

Summary

Structural reforms are often presented as a growth panacea. We review this concept through two separate analyses. First, we quantify the impact of wide-reaching reform packages implemented in twenty-three countries worldwide. Second, we look at the role that reforms had in contributing to spark 135 growth accelerations, i.e., positive up-breaks in growth patterns. All in all, our results point to the fact that deep economic reforms can have an important impact on a country’s growth rate but, often, they fail to deliver their benefits and, in some instances, they can even be detrimental. In achieving economic growth, there are no silver bullets. Rather, economic reforms should be framed as an opportunity that, if appropriately tailored to country-specific needs and well implemented, could yield important benefits.

Type
Chapter
Information
Publisher: Cambridge University Press
Print publication year: 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abadie, A., Diamond, A. and Hainmueller, J. (2010). ‘Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program’, Journal of the American Statistical Association, Vol. 105, No. 490, 493505. doi:DOI 10.1198/jasa.2009.ap08746.CrossRefGoogle Scholar
Abadie, A., Diamond, A, and Hainmueller, J. (2015). ‘Comparative Politics and the Synthetic Control Method’, American Journal of Political Science, Vol. 59, No. 2, 495510. doi:10.1111/ajps.12116.CrossRefGoogle Scholar
Abadie, A. and Gardeazabal, J. (2003). ‘The Economic Costs of Conflict: A Case Study of the Basque Country’, American Economic Journal: Economic Policy, Vol. 93, No. 1, 114132. doi:10.1257/000282803321455188.Google Scholar
Abiad, A., Oomes, N. and Ueda, K. (2008). ‘The Quality Effect: Does Financial Liberalization Improve the Allocation of Capital?Journal of Development Economics, Vol. 87, No. 2, 270282. doi:10.1016/j.jdeveco.2007.12.002.CrossRefGoogle Scholar
Acemoglu, D., Naidu, S., Restrepo, P. and Robinson, J. A. (2014). ‘Democracy Does Cause Growth’. NBER Working Paper, (20004), 164.Google Scholar
Adhikari, B., Duval, R., Hu, B. and Loungani, P. (2018). ‘Can Reform Waves Turn the Tide? Some Case Studies Using the Synthetic Control Method’, Open Economies Review, Vol. 29, No. 4, 879910.Google Scholar
Aghion, P., Howitt, P. and Mayer-Foulkes, D. (2005). ‘The Effect of Financial Development on Convergence: Theory and Evidence’, Quarterly Journal of Economics, Vol. 120, No. 1, 173222. doi:10.1162/qjec.2005.120.1.173.Google Scholar
Aizenman, J. and Spiegel, M. M. (2010). ‘Takeoffs’, Review of Development Economics, Vol. 14, No. 2, 177196.CrossRefGoogle Scholar
Alesina, A. F. and Summers, L. H. (1993). ‘Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence’, Journal of Money, Credit and Banking, Vol. 25, No. 2, 151162. doi:10.2307/2077833.CrossRefGoogle Scholar
Anderson, K. (2010). ‘Krueger, Schiff, and Valdes Revisited: Agricultural Price and Trade Policy Reform in Developing Countries since 1960’, Applied Economic Perspectives and Policy, Vol. 1, No. 2, 195231. doi:10.1093/aepp/ppq005.CrossRefGoogle Scholar
Barro, R. J. (1991). ‘Economic Growth in a Cross Section of Countries’, Quarterly Journal of Economics, Vol. 106, No. 2, 407443. doi:10.2307/2937943.CrossRefGoogle Scholar
Beck, T., Levine, R. and Loayza, N. (2000). ‘Finance and the Sources of Growth’, Journal of Financial Economics, Vol. 58, No. 1–2, 261300. doi:10.1016/S0304-405X(00)00072-6.Google Scholar
Bekaert, G., Harvey, C. R. and Lundblad, C. (2005). ‘Does Financial Liberalization Spur Growth?Journal of Financial Economics, Vol. 77, No. 1, 355. doi:10.1016/j.jfineco.2004.05.007.Google Scholar
Billmeier, A. and Nannicini, T. (2013). ‘Assessing Economic Liberalization Episodes: a Synthetic Control Approach’, Review of Economics and Statistics, Vol. 95, No. 3, 9831001. doi:10.1162/REST_a_00324.CrossRefGoogle Scholar
Bordon, R., Ebeke, C. and Shirono, K. (2016). ‘When Do Structural Reforms Work? On the Role of the Business Cycle and Macroeconomic Policies’, IMF Working Paper, (62).CrossRefGoogle Scholar
DeJong, D. N. and Ripoll, M. (2006). ‘Tariffs and Growth: An Empirical Exploration of Contingent Relationships’, Review of Economics and Statistics, Vol. 88, No. 4, 625640. doi:10.1162/rest.88.4.625.Google Scholar
Dell’Ariccia, G., Giovanni, J., Faria, A., et al. (2007). ‘Reaping the Benefits of Financial Globalization’, IMF Occasional Paper Series.CrossRefGoogle Scholar
Dervis, K. and Page, J. M. J. (1984). ‘Industrial Policy in Developing Countries’, Journal of Comparative Economics, Vol. 8, No. 4, 436451. doi:10.4337/9781781000267.CrossRefGoogle Scholar
Dollar, D. (1992). ‘Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs’, Economic Development and Cultural Change,Vol. 40, No. 3, 523544.Google Scholar
Dollar, D. and Kraay, A. (2004). ‘Trade, Growth, and Poverty’, Economic Journal, Vol. 114, No. 493, F22–F49. doi:10.1111/j.0013-0133.2004.00186.x.CrossRefGoogle Scholar
Duval, R., Furceri, D. and Jalles, J. (2017). ‘Job Protection Deregulation in Good and Bad Times’, IMF Working Paper, 277.CrossRefGoogle Scholar
Easterly, W. (1993). ‘How Much Do Distortions Affect Growth?Journal of Monetary Economics, Vol. 32, No.2, 187212. doi:10.1016/0304-3932(93)90002-W.CrossRefGoogle Scholar
Easterly, W. (2005). ‘National Policies and Economic Growth: A Reappraisal’, in Aghion, Philippe and Durlauf, Steven N. (ed.), Handbook of Economic Growth, Vol. 1A, Elsevier B.V., pp. 10151059. doi:10.1016/S1574-0684(05)01015-4.Google Scholar
Easterly, W., Kremer, M., Pritchett, L. and Summers, L. H. (1993). ‘Good Policy or Good Luck – Country Growth-Performance and Temporary Shocks’, Journal of Monetary Economics, Vol. 32, No. 3, 459483. doi:10.1016/0304-3932(93)90026-C.CrossRefGoogle Scholar
Edwards, S. (2001). ‘Capital Mobility and Economic Performance: Are Emerging Economies Different?’ NBER Working Paper 8076, 1–34. doi:10.3386/w8076.Google Scholar
Eggertsson, G., Ferrero, A. and Raffo, A. (2014). ‘Can Structural Reforms Help Europe?Journal of Monetary Economics, Vol. 61, 222. doi:10.1016/j.jmoneco.2013.11.006.Google Scholar
Eichengreen, B. (2001). ‘Capital Account Liberalization: What Do Cross-Sections Studies Tell Us?World Bank Economic Review, Vol. 15, No. 3, 341365.Google Scholar
Feenstra, R. C., Inklaar, R. and Timmer, M. P. (2015). ‘The Next Generation of the Penn World Table’, American Economic Review, Vol. 105, No. 10, 31503182. doi:10.1257/aer.20130954.Google Scholar
Frankel, J. and Romer, D. (1999). ‘Does Trade Cause Growth?American Economic Review, Vol. 89, No. 3, 379399.Google Scholar
Frischtak, C., Hadjimichael, B. and Zachau, U. (1989). ‘Competition Policies for Industrializing Countries’, Policy and Research Series.Google Scholar
Galindo, A., Schiantarelli, F. and Weiss, A. (2007). ‘Does Financial Liberalization Improve the Allocation of Investment? Micro-Evidence from Developing Countries’, Journal of Development Economics, Vol. 83, No. 2, 562587. doi:10.1016/j.jdeveco.2005.09.008.Google Scholar
Giuliano, P., Mishra, P. and Spilimbergo, A. (2013). ‘Democracy and Reforms: Evidence from a New Dataset’, American Economic Journal: Macroeconomics, Vol. 5, No. 4, 179204. doi:10.1257/mac.5.4.179.Google Scholar
Gollin, D. (2010). ‘Agricultural Productivity and Economic Growth’, in Aghion, Philippe and Durlauf, Steven (ed.), Handbook of Agricultural Economics, 1st ed., Vol. 4, Elsevier B.V., pp. 38253866. doi:10.1016/S1574-0072(09)04073-0.Google Scholar
Gulati, A., Fan, S. and Dalafi, S. (2005). ‘The Dragon and the Elephant: Agricultural and Rural Reforms in China and India’, MTID Discussion Paper No 87.Google Scholar
Hausmann, R., Klinger, B. and Wagner, R. (2008). ‘Doing Growth Diagnostics in Practice: A “Mindbook”’, Center of International Development at Harvard University – Working Papers, (177).Google Scholar
Hausmann, R., Pritchett, L. and Rodrik, D. (2005). ‘Growth Accelerations’, Journal of Economic Growth, Vol. 10, No. 4, 303329. doi:10.1007/s10887-005-4712-0.Google Scholar
Hausmann, R. and Rodrik, D. (2003). ‘Economic Development as Self-Discovery’, Journal of Development Economics, Vol. 72, No. 2, 603633. doi:10.1016/S0304-3878(03)00124-X.CrossRefGoogle Scholar
Hausmann, R., Rodrik, D. and Velasco, A. (2007). ‘Growth Diagnostics’, in Rodrik, D. (ed.), One Economics Many Recepies, Princeton University Press, p. 280.Google Scholar
IMF. (2015). ‘Structural Reforms and Macroeconomic Performance: Initial Considerations for the Fund’.Google Scholar
Jalilian, H., Kirkpatrick, C. and Parker, D. (2007). ‘The Impact of Regulation on Economic Growth in Developing Countries: A Cross-Country Analysis’, World Development, Vol. 35, No. 1, 87103. doi:10.1016/j.worlddev.2006.09.005.CrossRefGoogle Scholar
Jong-A-Ping, R. and De Haan, J. (2011). ‘Political Regime Change, Economic Liberalization and Growth Accelerations’, Public Choice, Vol. 146, No. 1–2, 93115.Google Scholar
Kar, S., Pritchett, L., Raihan, S. and Sen, K. (2013). ‘Looking for a Break: Identifying Transitions in Growth Regimes’, Journal of Macroeconomics, Vol. 38, No. PB, 151166. doi:10.1016/j.jmacro.2013.09.022.Google Scholar
Klein, M. W. and Olivei, G. P. (2008). ‘Capital Account Liberalization, Financial Depth, and Economic Growth’, Journal of International Money and Finance, Vol. 27, No. 6, 861875. doi:10.1016/j.jimonfin.2008.05.002.Google Scholar
Kopits, G. and Symansky, S. (1998). ‘Fiscal Policy Rules’, IMF Occasional Paper Series, 1–45.CrossRefGoogle Scholar
Kose, M. A., Prasad, E., Rogoff, K. and Wei, S.-J. (2009). ‚Financial Globalization: A Reappraisal’, IMF Staff Papers, Vol. 56, No. 1, 862. doi:10.1057/imfsp.2008.36.Google Scholar
Krueger, A. O. (2005). ‘De Tocqueville’s “Dangerous Moment”: The Importance of Getting Reforms Right’, World Economy, Vol. 28, 749763. doi:10.1111/j.1467-9701.2005.00705.x.Google Scholar
Levine, R. (1997). ‘Financial Development and Economic Growth: Views and Agenda’, Journal of Economic Literature, Vol. XXXV, . June, 688726. doi:10.1126/science.151.3712.867-a.Google Scholar
Levine, R. (2005). ‘Finance and Growth: Theory and Evidence’, in Aghion, P. and Durlauf, S. N. (ed.), Handbook of Economic Growth, Vol. 1, Elsevier B.V., pp. 865934. doi:10.1016/S1574-0684(05)01012-9.Google Scholar
Levine, R. and Renelt, D. (1992). ‘A Sensitivity Analysis of Cross-Country Growth Regressions’, American Economic Review, Vol. 82, No. 4, 942963.Google Scholar
Lin, J. Y. (1992). ‘Rural Reforms and Agricultural Growth in China’, American Economic Review, Vol. 82, No. 1, 3451.Google Scholar
Macours, K. and Swinnen, J. F. M. (2000). ‘Causes of Output Decline in Economic Transition: The Case of Central and Eastern European Agriculture’, Journal of Comparative Economics, Vol. 28, No. 1, 172206. doi:10.1017/CBO9781107415324.004.Google Scholar
Marrazzo, P. M. and Terzi, A. (2017). ‘Structural Reform Waves and Economic Growth, ‘ ECB Working Paper Series, (2111).Google Scholar
Moral-Benito, E. (2012). ‘Determinants of Economic Growth: A Bayesian Panel Data Approach’, Review of Economics and Statistics, Vol. 94, No. 2, 566579.CrossRefGoogle Scholar
Nicoletti, G. and Scarpetta, S. (2003). ‘Regulation, Productivity and Growth: OECD Evidence’, Policy Research Working Paper Series, 1–26. doi:10.1111/1468-0327.00102.Google Scholar
OECD (2012). ‘Economic Policy Reforms: Going for Growth 2012’.Google Scholar
Ostry, J. D., Prati, A. and Spilimbergo, A. (2009). ‘Structural Reforms and Economic Performance in Advanced and Developing Countries’, IMF Occasional Paper Series, 268.Google Scholar
Peruzzi, M. and Terzi, A. (2018). ‘Growth Acceleration Strategies’, Harvard CID Working Paper Series, (91).Google Scholar
Pevehouse, J., Nordstrom, T. and Warnke, K. (2004). ‘The Correlates of War 2 International Governmental Organizations Data Version 2.0’, Conflict Management and Peace Science, Vol. 21, No. 2, 101119. doi:10.1080/07388940490463933.Google Scholar
Pingali, P. L. and Xuan, V.-T. (1992). ‘Vietnam: Decollectivization and Rice Productivity Growth’, Economic Development & Cultural Change, Vol. 40, No. 4, 697718.CrossRefGoogle Scholar
Prasad, E. S., Rogoff, K., Wei, S. and Kose, M. A. (2007). ‘Financial Globalization, Growth and Volatility in Developing Countries’, in Harrison, A. (ed.), Globalization and Poverty, University of Chicago Press, pp. 457516. doi:10.1016/j.jmoneco.2006.08.001.CrossRefGoogle Scholar
Prati, A., Onorato, M. G. and Papageorgiou, C. (2013). ‘Which Reforms Work and under What Institutional Environment? Evidence from a New Data Set on Structural Reforms’, Review of Economics and Statistics, Vol. 95, July, 946968.Google Scholar
Pritchett, L. (2000). ‘Understanding Patterns of Economic Growth: Searching for Hills among Plateaus, Mountains, and Plains’, World Bank Economic Review, Vol. 14, No. 2, 221–50.Google Scholar
Quinn, D. (1997). ‘The Correlates of Change in International Financial Regulation’, American Political Science Review, Vol. 91, No. 3, 531551.Google Scholar
Quinn, D. and Toyoda, A. M. (2008). ‘Does Capital Account Liberalization Lead to Growth?Review of Financial Studies, Vol. 21, No. 3, 14031449. doi:10.1093/rfs/hhn034.Google Scholar
Rajan, R. G. and Zingales, L. (1998). ‘Financial Dependence and Growth’, American Economic Review, Vol. 88, No. 3, 559586. doi:10.1017/CBO9781107415324.004.Google Scholar
Rodriguez, F. and Rodrik, D. (2001). ‘Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence’, in Bernanke, K., Ben, S. Rogoff, (ed.), NBER Macroeconomics Annual 2000, Vol. 15, MIT Press, pp. 261338. doi:doi:10.1086/654419.Google Scholar
Rodrik, D. (1995). ‘Trade and Industrial Policy Reform’, in Behrman, J. and Srinivasan, T. N. (ed.), Handbook of Development Economics, Elvisier, pp. 29252982. doi:10.1016/S1573-4471(95)30022-8.Google Scholar
Rodrik, D. (1998). ‘Who Needs Capital-Account Convertibility?’ in Kenen, P. (ed.), Should the IMF Pursue Capital Account Convertibility? Princeton University Press, pp. 5565.Google Scholar
Rodrik, D. (2003). ‘What Do We Learn from Country Narratives?’ In Rodrik, D. (ed.), in Search of Prosperity: Analytical Narratives on Economic Growth, Princeton University Press, pp. 120.Google Scholar
Rodrik, D. (2009). One Economics, Many Recipes: Globalization, Institutions, and Economic Growth. Princeton University Press.Google Scholar
Rodrik, D. (2015). Economics Rules: The Rights and Wrongs of The Dismal Science. W. W. Norton.Google Scholar
Rodrik, D. (2018). Straight Talk on Trade. Princeton University Press.Google Scholar
Rodrik, D. and Subramanian, A. (2009). ‘Why Did Financial Globalization Disappoint?IMF Staff Papers, Vol. 56, No. 1, 112138. doi:10.1057/imfsp.2008.29.Google Scholar
Rozelle, S. and Swinnen, J. F. M. (2004). ‘Success and Failure of Reform: Insights from the Transition of Agriculture’, Journal of Economic Literature, Vol. 42, No.2, 404456. doi:10.1257/0022051041409048.Google Scholar
Sachs, J. D. and Warner, A. (1995). ‘Economic Reform and the Process of Global Integration’, Brookings Papers on Economic Activity, Vol. 26, No. 1, 1118. doi:10.2307/2534573.Google Scholar
Sala-i-Martin, X., Doppelhofer, G. and Miller, R. I. (2004). ‘Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach’, American Economic Review, Vol. 94, No. 4, 813835. doi:10.1257/0002828042002570.CrossRefGoogle Scholar
Wacziarg, R. and Welch, K. H. (2008). ‘Trade Liberalization and Growth: New Evidence’, World Bank Economic Review, Vol. 22, No.2, 187231. doi:10.1093/wber/lhn007.Google Scholar
Williamson, J. (ed.) (1994). The Political Economy of Policy Reform. Institute for International Economics.Google Scholar
World Bank. (2008). The Growth Report: Strategies for Sustained Growth and Inclusive Development.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×