The Role Of Structural Reforms In Raising Economic Growth In Central America

Central America experienced moderate growth during the last decade, including in the years leading up to the global financial crisis, but the rate of convergence toward advanced country income levels has still been slow. Moreover, forecasts imply that these trends will continue. What can be done to spur higher growth in Central America? We bring new data to bear on this question-version 7.0 of the Penn World Table and a new IMF database on structural reforms. Our cross-country panel regression of economic growth using System GMM captures the importance to growth of conditional convergence, factor accumulation, and macro policies. In addition, structural efficiency is a significant factor in explaining growth performance. We construct a broad index of efficiency and find that increasing the degree of structural efficiency by one standard deviation raises growth by 1⁄2 percent. This implies that Central American countries could significantly increase their long-run growth rates by increasing the flexibility of markets and improving the quality of regulation.

For decades, Central America has faced market dependency, natural disasters, and political systems characterized by protectionist policies and low participation--situations that have had a tremendous impact on its economic development. This two-volume set is a comprehensive assessment of Central America's position in the world economy, and it serves as a handbook for the important economic reforms Central America must undertake to become a viable competitor in the international economy.

This publication develops a simple appreciative model, which explores some of the issues faced by structural reforms, technological gaps and economic development in Latin America. The first section introduces the issues and provides an overview of the publication. Section two introduces a brief view as to how the evolutionary approach should be adapted to analyze the impact of recent structural reforms upon the specialization pattern and technological capabilities accumulated in so called developing economies. Section three provides a simple macro-to-micro model of the stabilization cum structural reform process. Sections four and five are devoted to investigating recent changes in the pattern of production specialization of the Latin American economies and the relationship such changes have with the exit and entry of firms.

A Brookings Institution Press and Economic Commission for Latin America and the Caribbean (ECLAC) publication In the last ten to fifteen years, the Latin American and Caribbean region has undergone the most significant transformation of economic policy since World War II. Through a series of structural reforms, an increasing number of countries have moved from closed, state-dominated economies to ones that are more market oriented and open to the rest of the world. Policymakers expected that these changes, in conjunction with lower rates of inflation and increased spending in the social area, would speed up economic growth, increase productivity, and lead to the creation of more jobs and greater equality. Have those expectations been fulfilled? Analyzing the impact of the reforms in nine countries (Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Jamaica, Mexico, Peru), this study provides a detailed picture of progress to date. At the overall regional level, the book suggests, the reforms have had a surprisingly small impact: a small positive impact on investment and growth, and a small negative impact on employment and income distribution. But at the country, sectoral, and microeconomic levels, it finds evidence of strong effects, with some units doing very well and others falling behind.

This is an excerpt from Paving the Way to Growth and Prosperity in Central America, Panama, and the Dominican Republic edited by Kimberly Beaton, Roberto Garcia Saltos, and Lorenzo Figliuoli. Over the past three decades, countries in Central America, Panama, and the Dominican Republic have experienced sustained economic transfor-mation. The region has moved away from its rural and agricultural past to a modern and urban present and has significantly integrated its econ-omies regionally and globally. Many factors have shaped the region’s economic performance and are expected to contribute to its future development. The book aims to foster policy dialogue and contribute to the efforts to address the region’s unique challenges. The first part looks at the region’s growth with a view to understanding how structural determinants have contributed to the region’s uneven gains and the resulting priorities to strengthen the foundations of growth. The second part of the book high-lights the importance of addressing the region’s fiscal challenges and supporting growth and improved social outcomes. Finally, the third part of the book emphasizes the importance of a supportive financial sector for growth, including through financial inclusion and development. This excerpt is taken from uncorrected page proofs. Please check quota-tions and attributions against the final published volume.

Since the 1980’s with the introduction of IMF/WB adjustment programs structural reforms have been a core part of the reform agenda in the Caribbean. The paper reviewed the package of structural reforms in trade liberalization, financial liberalization and tax policy, and gauges their impact on growth. The paper used a set of reform indices to gauge both short-run and long-run effects of structural reforms on growth, controlling for other possible growth determinants using panel dynamic OLS estimation. In addition, recognizing the importance of institutions to growth the empirical analysis also analyzed the impact of institutional quality on growth for a sample of small states including the Caribbean. We concluded that the benefits of structural reforms are only seen over the long-term and in reinvigorating growth the reform effort needs to be revived and include greater attention to strengthening institutional quality.

Analyses processes of democratization and economic reform in five Latin American countries from the early 1980s to 1993.

In the last ten to fifteen years, profound structural reforms have moved Latin America and the Caribbean from closed, state-dominated economies to ones that are more market-oriented and open. Policymakers expected that these changes would speed up growth. This book is part of a multi-year project to determine whether these expectation have been fulfilled. Focusing on technological change, the impact of the reforms on the process of innovation is examined. It notes that the development process is proving to be highly heterogenous across industries, regions and firms and can be described as strongly inequitable. This differentiation that has emerged has implications for job creation, trade balance, and the role of small and medium sized firms. This ultimately suggests, amongst other things, the need for policies to better spread the use of new technologies.