“The Washington Consensus Works: Causal Effects of Reform, 1970–452015”, 2020-09-08 (; similar):
Sustained economic reform statistically-significantly raises real GDP per capita over a 5-year 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.
Traditional policy reforms of the type embodied in the Washington Consensus have been out of academic fashion for decades. However, we are not aware of a paper that convincingly rejects the efficacy of these reforms. 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 1970–452015.
The average treatment effect associated with these reforms is positive, sizeable, and statistically-significant over 5-year and 10-year windows. The result is robust to different thresholds for defining reform and different estimation methods.
We argue that the policy reform baby was prematurely thrown out with the neoliberal bathwater.
[Keywords: reform, Washington Consensus, rule of law, property rights, economic development]