Assessing the validity of structural reform aggregations in economic growth models of 24 transition economies
Date
2021
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Tartu Ülikool
Abstract
During the early 1990s a trend of aggregating policy variables emerged out of
econometric examinations of growth in transition countries, where more conventional
growth models proved inadequate or incomplete. This thesis examines the use of one
aggregation in particular, the cumulative liberalization index (CLI) representing
structural reforms, and how different constructions of the index based on its conceptual
structure can lead to different results. Further, the implications of different conceptual
structures can lead to far different conclusions in applications of policy. This analysis
shows, that although the different aggregations have similar capacities to predict
growth, there are important differences in how the results are interpreted and applied.
Namely, different conclusions about the effect of liberalization policy can be formed or
obscured based on the outcomes of economic models that use different aggregations of
policy indicators. A direct line can be drawn from the concept structuring through to the
results and interpretation. Additionally, a conceptually simplified model based on the
substantive results of the analysis is proposed that eliminates the need for a structural
reforms construct entirely.