Using synthetic control method to estimate the growth effects of economic liberalisation : evidence from transition economies

Kantorowicz, Jaroslaw (author), Spruk, Rok (author)

We examine the contribution of institutional reforms to economic growth. To this end, we distinguish between several classes of institutional reform in the approach to economic liberalisation. Based on a sample of 24 current and former transition economies for the period 1980–2016, we estimate the counterfactual scenarios related to each distinctive institutional approach to the economic liberalisation by making use of the synthetic control method. Our evidence uncovers notable contrasts in the long-term effectiveness of designated policy approaches in recovering from the transitional recession. A variety of synthetic control estimates suggests that a sustained big bang approach (rapid reforms) appears to be the most effective approach, while an abortive and gradualist approach tends to produce a permanent breakdown of the growth trajectories relative to the estimated counterfactuals. The point estimates survive an extensive battery of placebo tests. By employing the same methodological tool kit, future research could examine the impact of transition reforms on other socio-economic variables, such as the poverty rates, income inequalities, health and environmental outcomes.

• Language: English
• Keywords: economic growth, economic liberalisation, synthetic control method, transition economies
• Work type: Article
• Typology: 1.01 - Original Scientific Article
• Organization: EF - School of Economics and Business
• Publication status: Published
• Publication version: Version of Record
• Year: 2024
• Number of pages: Str. 2332-2360
• Numbering: Vol. 47, iss. 6
• PID: 20.500.12556/RUL-167418
• UDC: 330.1
• ISSN on article: 0378-5920
• DOI: 10.1111/twec.13544
• COBISS.SI-ID: 179257603
• Publication date in RUL: 20.02.2025

Record is a part of a journal

• Title: The world economy
• Shortened title: World econ.
• Publisher: Elsevier
• ISSN: 0378-5920
• COBISS.SI-ID: 26642176

Licences

• License: CC BY 4.0, Creative Commons Attribution 4.0 International
• Link: http://creativecommons.org/licenses/by/4.0/
• Description: This is the standard Creative Commons license that gives others maximum freedom to do what they want with the work as long as they credit the author.

Secondary language

• Language: Slovenian
• Keywords: ekonomija, liberalizacija, metode