Working Paper: NBER ID: w14595
Authors: Francisco J. Buera; Alexander Mongenaranjo; 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. We find that there is a strong geographical component to learning, which is crucial to explain the slow adoption of liberal policies during the postwar period. Our model also predicts that there would be a substantial reversal to state intervention if nowadays the world was hit by a shock of the size of the Great Depression.
Keywords: market-oriented policies; policy choices; learning; economic growth
JEL Codes: O43; O50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Policymakers' beliefs about the benefits of market-oriented policies (F68) | Policymakers' experiences (D78) |
| Policymakers' beliefs about the benefits of market-oriented policies (F68) | Policy reversals (E65) |
| Geographical distance (R12) | Weight assigned to foreign experiences (F22) |
| Negative growth shocks (Q43) | Policymakers' beliefs (D78) |
| Policymakers' experiences (D78) | Policymakers' beliefs about the benefits of market-oriented policies (F68) |
| Geographical component of learning (R12) | Slow adoption of market-oriented policies (P39) |
| Policymakers' beliefs about the benefits of market-oriented policies (F68) | Policy choices (D78) |
| Policy choices (D78) | Switches in policy (D78) |