Are complementary reforms a "luxury" for developing countries?

Jorge Braga de Macedo, Joaquim Oliveira Martins, Bruno Rocha

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This paper investigates the impact of complementarity reforms on growth and how it depends on GDP per capita. Based on reform data for six policy areas compiled from various sources during the period 1994-2006 for over 100 countries, we compute composite indicators of reform level and complementarity. We provide qualitative justification for the existence of pair-wise complementarities among policy areas. We then use cross-section and panel data estimates to test the effect of reform level and complementarity on GDP per capita growth. We found reforms to be positively related and their dispersion (or the inverse of complementarity) negatively related to growth, controlling for initial conditions, monetary stability and other structural and institutional variables, as well as endogeneity of reform level and complementarity. We show that the effect of policy complementarity is a stronger condition for sustainable growth in developing than in advanced countries, to conclude that complementary reforms are not a 'luxury' for developing countries.

Original languageEnglish
Pages (from-to)417-435
Number of pages19
JournalJournal Of Comparative Economics
Volume42
Issue number2
DOIs
Publication statusPublished - May 2014

Keywords

  • Developing countries
  • Growth regressions
  • Policy complementarities
  • Second-best
  • Structural reforms

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