Identifying Drivers of Economic Reform: A Case Studies Approach

By Brown, Matthew | Journal of Private Enterprise, Spring 2016 | Go to article overview

Identifying Drivers of Economic Reform: A Case Studies Approach


Brown, Matthew, Journal of Private Enterprise


I. Introduction and Background

A growing body of research has been dedicated to understanding the role that economic institutions and policies play in determining economic and social outcomes. The primary finding of that research, although not universally agreed to by researchers, is that more liberal institutions and policies are positively causally associated with more economic growth (Acemoglu and Robinson 2012).1 But significant ignorance largely remains in regard to our understanding of how countries achieve and maintain those institutions, and empirical analysis is limited in its ability to illuminate that question.2 Qualitative, historical, and interdisciplinary analysis is required to better understand how institutions and policies evolve (Boettke, Coyne, and Leeson 2013; Boettke 2011). This paper summarizes the findings of twenty-four country case studies of institutional reform since 1980 in an attempt to illuminate some of the recurring themes and possible causal factors in significant reform processes.

From 1980 to the middle of the first decade of the twenty-first century, there was a broad worldwide movement toward freer markets and government deregulation, a move away from the trend toward more centralization and planning that had dominated since the Great Depression and World War II. The reforms of the Reagan and Thatcher governments in the 1980s were seen as examples to be followed by some developing countries, and at the end of the 1980s, the collapse of communist systems in Eastern Europe and the Soviet Union led to a widespread period of economic and institutional reform. Reforms of the Chinese communist system begun in the early 1980s and the liberalization begun by India in the early 1990s provide examples of countries not directly in either the American or Soviet spheres that also took part in the trend away from planning and centralization during this period (Yergin and Stanislaw 2002).

This era provides the possibility for historical and comparative study of the factors that lead to institutional and policy change. Although the period under question coincides with a renaissance of economics research concerned with the question of growth, much of that literature has been focused on theoretical models and later empirical analysis rather than case studies of actual reforms.3 The process of institutional reform and economic growth is so complex and involves so many different actors that one methodological approach, while potentially very valuable, is bound to leave important questions unaddressed. Case studies should simultaneously make it possible to identify areas for more rigorous empirical analysis and possibly shed light on areas that are not as easily addressed empirically, such as the roles of culture, history, the transmission and adoption of ideas, and informal institutions-areas where more interdisciplinary efforts and approaches may be needed. A large body of literature in the social sciences, mostly outside of economics, has demonstrated the importance of these approaches and questions.4

This paper summarizes and contextualizes a much larger project of case studies that identifies the major institutional reforms that have occurred since 1980. It identifies from those case studies some major underling factors associated with the significant reforms of this period, suggests some hypotheses about how they may be related, and identifies significant holes in our understanding that need further investigation. Data is provided on the largest movements in economic institutions (toward, as well as away from, more economic liberalism) and should provide starting-point evidence for scholars in various disciplines interested in determining which countries' reforms should be studied in more detail in future work to begin to build a better understanding of the drivers of institutional reform.

II. Case Study Selection

The period from the very late 1970s and early 1980s up to the onset of the global economic crisis beginning around 2006 was characterized by broad movements globally toward economic liberalism. …

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