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The Washington consensus works: Causal effects of reform, 1970-2015

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  • Grier, Kevin B.
  • Grier, Robin M.

Abstract

Traditional policy reforms of the type embodied in the Washington Consensus have been out of academic fashion for decades. However, we are not aware of a paper that convincingly rejects the efficacy of these reforms. In this paper, we define generalized reform as a discrete, sustained jump in an index of economic freedom, whose components map well onto the points of the old consensus. We identify 49 cases of generalized reform in our dataset that spans 141 countries from 1970 to 2015. The average treatment effect associated with these reforms is positive, sizeable, and significant over 5- and 10- year windows. The result is robust to different thresholds for defining reform and different estimation methods. We argue that the policy reform baby was prematurely thrown out with the neoliberal bathwater.

Suggested Citation

  • Grier, Kevin B. & Grier, Robin M., 2021. "The Washington consensus works: Causal effects of reform, 1970-2015," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 59-72.
  • Handle: RePEc:eee:jcecon:v:49:y:2021:i:1:p:59-72
    DOI: 10.1016/j.jce.2020.09.001
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    More about this item

    Keywords

    Reform; Washington Consensus; Rule of law; Property rights; Economic development;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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