Heterogenous Effects of the Determinants of Pro-market Reforms: Panel Quantile Estimation for OECD Countries

In empirical studies on what determines reform policies, the average effect of the main determinants of reforms on reform policies is explained; however, the issue of what determines the reform policies has not been addressed in the entire distribution. Therefore, we know very little about what triggered reforms at different levels of liberalization. In order to clarify this issue, the causes of reforms are estimated for OECD countries between 1996 and 2017 using the panel quantile method with non-additive fixed effects developed by Powell (2016) and the moment quantile regression method (MMQR) developed by Machado and Silva (2019). The results of both methods confirm that the reasons for the reforms have heterogeneous and asymmetrical effects on pro-market reforms. Contrary to the prediction of the famous crisis hypothesis, high inflation negatively affects reform policies in all quantiles. The impact of strong governments on reforms is significant and positive across the distribution. The contribution of right-wing governments to the implementation of pro-market regulations is especially evident in high quantiles where market interventions are high. There is weaker evidence for the output gap, unemployment level, and the impact of public debt on reforms.