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

By Bibek Adhikari, Romain A Duval, Bingjie Hu, Prakash Loungani

August 9, 2016

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Bibek Adhikari, Romain A Duval, Bingjie Hu, and Prakash Loungani. Can Reform Waves Turn the Tide? Some Case Studies Using the Synthetic Control Method, (USA: International Monetary Fund, 2016) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Active labor market policies, Competition, Financial markets, Labor, Labor market reforms, Macrostructural analysis, Structural reforms, Unemployment

Keywords: Active labor market policies, Competition, Donor country, Europe, Firm level, Fiscal policy, Global, Government's share, Growth, Heads of state government, Income support, Industrial relations, Labor and productivity market reforms, Labor market, Labor market reforms, Liberalization, Life insurance insurance company, Predictive power, Product market, Real GDP, Reform package, State life insurance insurance company, Structural reforms, Synthetic control method, Unemployment, Untreated country, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/171
Stock No:

WPIEA2016171
ISBN:

9781475524277
ISSN:

1018-5941

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