The Washington Consensus Works: Causal Effects of Reform, 1970-2015
Sustained economic reform significantly raises real GDP per capita over a 5- to 10-year horizon.
Despite the unpopularity of the Washington Consensus, its policies reliably raise average incomes.
Countries that had sustained reform were 16% richer 10 years later.
As for the method:
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.
There are dozens of books trying to tell you this is not true, but…it is true, at least as best we know.
That is all from the new paper by Kevin and Robin Grier, did you know by the way that I helped to fix them up, leading to their later marriage and also coauthorships?
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