The Inverse Domino Effect: Are Economic Reforms Contagious?

18 Pages Posted: 9 Mar 2011

See all articles by Martin Gassebner

Martin Gassebner

ETH Zurich - KOF Swiss Economic Institute; CESifo (Center for Economic Studies and Ifo Institute)

Noel Gaston

University of South Australia

Michael J. Lamla

ETH Zurich - KOF Swiss Economic Institute; University of Essex

Multiple version iconThere are 2 versions of this paper

Date Written: February 24, 2011

Abstract

This article examines whether a country's economic reforms are affected by reforms adopted by other countries. Our theoretical model predicts that reforms are more likely when factors of production are internationally mobile and reforms are pursued in other economies. Using the change in the Index of Economic Freedom as the measure of market-liberalizing reforms and panel data (144 countries, 1995-2006), we test our model. We find evidence of the spillover of reforms. Moreover, consistent with our model, international trade is not a vehicle for the diffusion of economic reforms; rather the most important mechanism is geographical or cultural proximity.

Suggested Citation

Gassebner, Martin and Gaston, Noel and Lamla, Michael J., The Inverse Domino Effect: Are Economic Reforms Contagious? (February 24, 2011). International Economic Review, Vol. 52, Issue 1, pp. 183-200, 2011. Available at SSRN: https://ssrn.com/abstract=1781597 or http://dx.doi.org/10.1111/j.1468-2354.2010.00624.x

Martin Gassebner (Contact Author)

ETH Zurich - KOF Swiss Economic Institute ( email )

Weinbergstrasse 35
Zurich, 8092
Switzerland

HOME PAGE: http://www.kof.ethz.ch/chair/

CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Munich, DE-81679
Germany

Noel Gaston

University of South Australia ( email )

37-44 North Terrace
Adelaide SA 5000, South Australia 5001
Australia

Michael J. Lamla

ETH Zurich - KOF Swiss Economic Institute ( email )

Zurich
Switzerland

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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