Working Paper: CEPR ID: DP8030
Authors: Francisco J. Buera; Alexander Monge-Naranjo; Giorgio E. Primiceri
Abstract: We study the evolution of market-oriented policies over time and across countries. We consider a model in which own and neighbors' past experiences influence policy choices through their effect on policymakers' beliefs. We estimate the model using a large panel of countries and find that it fits a large fraction of the policy choices observed in the postwar data, including the slow adoption of liberal policies. Our model also predicts that there would be reversals to state intervention if nowadays the world was hit by a shock of the size of the Great Depression.
Keywords: beliefs; development; growth; market-oriented policy
JEL Codes: O11; O43; P00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Policymakers' beliefs about market-oriented policies (E65) | Adoption of market-oriented policies (F68) |
| Past experiences of policymakers (E65) | Policymakers' beliefs about market-oriented policies (E65) |
| Experiences of neighboring countries (O57) | Policymakers' beliefs about market-oriented policies (E65) |
| Policymakers' beliefs (D78) | Transition from state intervention to market-oriented policies (P30) |
| Poor economic performances in state-interventionist countries (P17) | Policymakers' beliefs about market-oriented policies (E65) |
| Negative growth shock (E32) | Reversion to state intervention in market-oriented countries (L50) |
| Initial beliefs formed before 1950 (B15) | Slow trend toward market orientation in developing countries (F61) |
| Subsequent economic performances (P17) | Slow trend toward market orientation in developing countries (F61) |