Can Reform Waves Turn the Tide? Some Case Studies Using the Synthetic Control Method

36 Pages Posted: 9 Dec 2016

See all articles by Bibek Adhikari

Bibek Adhikari

Illinois State University - Department of Economics

Romain Duval

International Monetary Fund (IMF)

Bingjie Hu

International Monetary Fund (IMF)

Prakash Loungani

International Monetary Fund (IMF)

Date Written: August 2016

Abstract

A number of advanced economies carried out a sequence of extensive reforms of their labor and product markets in the 1990s and early 2000s. Using the Synthetic Control Method (SCM), this paper implements six case studies of well-known waves of reforms, those of New Zealand, Australia, Denmark, Ireland and Netherlands in the 1990s, and the labor market reforms in Germany in the early 2000s. In four of the six cases, GDP per capita was higher than in the control group as a result of the reforms. No difference between the treated country and its synthetic counterpart could be found in the cases of Denmark and New Zealand, which in the latter case may have partly reflected the implementation of reforms under particularly weak macroeconomic conditions. Overall, also factoring in the limitations of the SCM in this context, the results are suggestive of a positive but heterogenous effect of reform waves on GDP per capita.

Keywords: Fiscal reforms, New Zealand, Australia, Denmark, Ireland, Netherlands, Germany, Labor market reforms, Economic growth, Developed countries, Cross country analysis, Econometric models, structural reforms, synthetic control method,liberalization, labor and productivitymarket reforms, growth.

JEL Classification: E02, J08, O40, O43

Suggested Citation

Adhikari, Bibek and Duval, Romain and Hu, Bingjie and Loungani, Prakash, Can Reform Waves Turn the Tide? Some Case Studies Using the Synthetic Control Method (August 2016). IMF Working Paper No. 16/171, Available at SSRN: https://ssrn.com/abstract=2882608

Bibek Adhikari (Contact Author)

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States

Romain Duval

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Bingjie Hu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Prakash Loungani

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7043 (Phone)
202-623-4740 (Fax)

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