Structural reforms and economic growth in Latin America: A sensitivity analysis

Since the mid-1980s, most Latin American countries have undertaken far-reaching structural reform along the lines of the so-called Washington Consensus. This article tests the robustness of the empirical evidence provided by a variety of studies in support of the reforms and their positive impact on Latin American growth. The results are striking. No reform has a robust positive correlation with growth, investment or productivity in the region, and there is evidence that some reforms, particularly labour market deregulation, may actually be harming growth. The results also show that the time effects for the period 1987-1995 were if anything positive, contradicting the prevailing wisdom that the poor economic performance seen in Latin America in the face of numerous far-reaching structural reforms has been due to an adverse international environment.