Assessing Economic Liberalization Episodes: A Synthetic Control Approach

Abstract

We use a transparent statistical methodology for data-driven case studies–the synthetic control method–to investigate the impact of economic liberalization on real GDP per capita in a worldwide sample of countries. Economic liberalization is measured by a widely used indicator that captures the scope of the market in the economy. The methodology compares the postliberalization GDP trajectory of treated economies with the trajectory of a combination of similar but untreated economies. We find that liberalizing the economy had a positive effect in most regions, but more recent liberalizations, in the 1990s and mainly in Africa, had no significant impact.