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Growth-Equity Trade-offs in Structural Reforms, Jonathan Ostry, Andrew Berg, Siddharth Kothari

Abstract
Do structural reforms that aim to boost potential output also change the distribution of income? We shed light on this question by looking at the broad patterns in the cross-country data covering advanced, emerging-market, and low-income countries. Our main finding is that there is indeed evidence of a growth-equity tradeoff for some important reforms. Financial and capital account liberalization seem to increase both growth and inequality, as do some measures of liberalization of current account transactions. Reforms aimed at strengthening the impartiality of and adherence to the legal system seem to entail no growth-equity tradeoff—such reforms are good for growth and do not worsen inequality. The results for our index of network reforms as well as our measure of the decentralization of collective labor bargaining are the weakest and least robust, potentially due to data limitations. We also ask: If some structural reforms worsen inequality, to what degree does this offset the growth gains from the reforms themselves? While higher inequality does dampen the growth benefits, the net effect on growth remains positive for most reform indicators
Table Of Contents
Cover -- Contents -- I. INTRODUCTION -- II. A REVIEW OF THE LITERATURE -- III. REFORMS DATA -- IV. GROWTH-EQUITY TRADE-OFFS: AN ASSESSMENT FRAMEWORK -- V. GROWTH-EQUITY TRADE-OFFS IN REFORMS: RESULTS -- A. Domestic Finance Reforms -- B. Capital Account Liberalization -- C. Rule of Law -- D. Current Account Liberalization -- E. Networks Reform -- F. Collective Bargaining Reforms -- G. Reforms, Growth, and Inequality: A Look at Country Cases -- VI. STRUCTURAL REFORMS, INEQUALITY, AND GROWTH: A SIMPLE CALCULATION -- VII. CONCLUSION -- FIGURES -- Figure 1. Box Plots of Reform Indices -- Figure 2. Reform Indices Over Time by Income Level -- Figure 3. Domestic Finance Reforms: Growth and Inequality Around Breaks -- Figure 4. Capital Account Liberalization: Growth and Inequality Around Breaks -- Figure 5. Tariff Liberalization: Growth and Inequality Around Breaks -- Figure 6. Current Account Liberalization: Growth and Inequality Around Breaks -- Figure 7. Network Reforms: Growth and Inequality Around Breaks -- Figure 8. Collective Bargaining: Growth and Inequality Around Up-breaks -- Figure 9. Collective Bargaining: Growth and Inequality Around Down-breaks -- Figure 10: Growth and Inequality Effects of Structural Reforms -- Figure 11: Short-term Effect of Reforms on Growth -- Figure 12. Country Cases: Growth, Inequality &amp -- Structural Reform Episodes -- Figure 13: Direct and Indirect Effect of Reforms on Steady State Level of Per-capita GDP -- TABLES -- Table 1. Domestic Finance Reforms: Growth-Equity Trade-off -- Table 2. Subcomponents of Domestic Finance Reforms Index: Growth-Equity Trade-off -- Table 3. Capital Account Liberalization: Growth-Equity Trade-off -- Table 4. Rule of Law: Growth-Equity Trade-offs -- Table 5. Tariff Liberalization: Growth-Equity Trade-off -- Table 6. Current Account Liberalization: Growth-Equity Trade-off
Language
eng
Literary Form
non fiction
Physical Description
1 online resource (47 pages)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781484337011

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