Structural Reforms and Productivity Growth in Emerging Market and Developing Economies

Abstract

This paper empirically assesses the role of structural and institutional reforms in driving productivity growth across countries at different stages of development, using a distance-tofrontier framework. It gauges whether particular policies and reforms matter more for increasing productivity growth at the aggregate and sectoral levels for some emerging market and developing economies (EMDEs) than others. Recognizing the possibility of time lags between reform implementation and reform payoffs, the paper also examines how productivity gains from various reforms evolve over the the short-and medium-term.

On the Impact of Structural Reforms on Output and Employment: Evidence from a Cross-country Firm-level Analysis

“…The tariff rates are already at low rates, close to the frontier, so any changes we capture in the 2000s would be small. In fact, we find no significant evidence of lower average tariff rates having any positive effects on firm output or productivity in line with previous studies(IMF, 2015;Dabla-Norris et al, 2016). Hence, given our focus on regulations, we study the effects of deregulating nontariff trade barriers instead.7 Mandated cost of dismissal, trade, and institutional reform indices are available at a five-year frequency between 1970 and 2000.…”

“…6 For institutional reforms, we take the legal rights index from the Fraser Institute. This measure has been commonly used in the literature studying the effects of sound institutional and legal systems, including IMF (2015) and Dabla-Norris et. al (2016).…”

“…Institutional reforms, such as a stricter enforcement of contracts and property rights, a faster resolving of insolvencies, and reductions in red tape and corruption, can also lead to more investment by reducing firms' costs of adjusting the capital stock in reaction to changes in fundamentals (Alesina et al, 2005). That said, the payoffs from alternative structural reforms depend on various country-specific factors, including the stage of development (Dabla-Norris, Ho and Kyobe, 2016;IMF, 2015;and Prati et al, 2013). In particular, previous studies suggest that advanced economies tend to generate larger marginal gains from financial market deepening and product and labor market reforms, while developing countries benefit more from trade liberalization and less state intervention in agriculture.…”

Total Factor Productivity Convergence in Developing Countries: Role of Technology Diffusion

“…Many studies have been successful in reasserting the positive impact of FDI on TFP growth. Among these prominent ones are by Borensztein et al (1998), Savvides andZachariadis (2005), Fleisher et al (2010) and Dabla-Norris et al (2016).…”

Housing, Finance, Policy and the Wider Economy

“…Policy makers intervene in the housing market in the pursuit of economic, financial, social and environmental objectives. Strategic priorities, reform payoffs and the relative importance of policy instruments change with the position of an economy along the development path (e.g., Poterba & Noguchi, 1994;Dabla-Norris et al, 2016). Worldbank (1993) summarizes the key areas of a potential housing policy reform depending on the level of development of an economy.…”