The Effects of Structural Reforms in Europe: A Meta-Analysis

• Název práce v češtině: Dopady štrukturálnych reforiem v Európe: Metaanalýza
• Název v anglickém jazyce: The Effects of Structural Reforms in Europe: A Meta-Analysis
• Klíčová slova: metaanalýza, štrukturálne reformy, hospodársky rast, publikačná selektivita
• Klíčová slova anglicky: meta-analysis, structural reforms, growth, publication bias
• Akademický rok vypsání: 2016/2017
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: prof. PhDr. Tomáš Havránek, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 09.06.2017
• Datum zadání: 09.06.2017
• Datum a čas obhajoby: 16.01.2019 09:00
• Místo konání obhajoby: Opletalova - Opletalova 26, O105, Opletalova - místn. č. 105
• Datum odevzdání elektronické podoby: 04.01.2019
• Datum proběhlé obhajoby: 16.01.2019
• Oponenti: doc. PhDr. Adam Geršl, Ph.D.

Seznam odborné literatury

Babecky, J., Campos, N. F., 2011. Does reform work? An econometric survey of the reform-growth puzzle. Journal of Comparative Economics. 39(2), 140-158.
Babecky, J., Havranek, T., 2013. Structural Reforms and Economic Growth: A Meta-Analysis. Czech National Bank.
Bouis, R., Duval, R., 2011. Raising potential growth after the crisis: a quantitative assessment of the potential gains from various structural reforms in the OECD area and beyond (No. 835). OECD Publishing.
Card, D., Kluve, J., Weber, A., 2010. Active labour market policy evaluations: A meta-analysis. The economic journal. 120(548).
Doucouliagos, H., Ulubasoglu, M. A., 2008. Democracy and economic growth: a meta-analysis. American Journal of Political Science, 52(1), 61-83.
Havranek, T., Irsova, Z., Janda, K., 2012. Demand for gasoline is more price-inelastic than commonly thought. Energy Economics. 34(1), 201-207.
McQuinn, K., Whelan, K., 2015. Europe's long-term growth prospects: With and without structural reforms.
Sebri, M., 2014. A meta-analysis of residential water demand studies. Environment, development and sustainability. 16(3), 499-520.
Stanley, T.D., 2001. Wheat from Chaff: meta-analysis as quantitative literature review. J. Econ. Perspect. 15 (3), 131-150.
Stanley, T.D., 2005. Beyond publication bias. J. Econ. Surv. 19 (3), 309-345.

Předběžná náplň práce

Motivation

Structural reforms represent a popular tool for governments aspiring to achieve faster economic growth. Market deregulation, trade, institutional and financial sector reforms, if appropriately applied, may improve factor productivity and bring macroeconomic benefits. For governments designing the optimal policy and aiming to boost their economic performance, the knowledge of the effect that particular reforms have on the economy is of the utmost importance. Hence, over the years this topic has received a lot of attention in the academic community.

Plethora of authors have focused on reforms adopted in various countries, however, often with results that differ in direction or size of the predicted reform effect (McQuinn and Whelan, 2015; Bouis and Duval, 2011). The solution offers a quantitative procedure called 'meta-analysis'. This approach enables to understand the causes of variation and combine the results of multiple studies, thus giving the most objective outcome. Meta-analysis has been widely used in economics, with its application in labour economics, Card et al. (2010) use it to evaluate labour market policies; in resource economics, Havranek et al. (2012) and Sebri (2014) determine the price and income elasticities of gasoline and water, respectively; Doucouliagos and Ulubasoglu (2008) focus on the impact of political democracy on economic growth.

The basis for this thesis form two papers, Babecky and Campos (2011) and Babecky and Havranek (2013). The first identifies the main factors that explain the variation in estimated reform effects, while the latter further improves the analysis by correcting for publication bias and extends the discussion to the magnitude of the reform effect. The focus of both of the studies lies on transition economies. On the other hand, on European non-transition countries there has not been done any meta-analysis yet, which serves as an objective for this thesis.

Hypotheses
Hypothesis \#1: The literature estimating the effect of structural reforms on economic growth is affected by publication bias.
Hypothesis \#2: Numerical estimates of the reform effect depend on the methodology employed to estimate them.
Hypothesis \#3: Average structural reform has a strong positive long-run effect on economic performance.


Methodology

The main aim of the thesis is to investigate the responses of economic growth in Europe to various types of structural reforms using empirical research studies. The principal tool for achieving this objective is meta-regression analysis as described by Stanley (2001).

The first step when conducting meta-analysis is searching for all studies relevant to the topic. For this purpose, I will use standard databases (f.e. RePEc, EconLit, SSRN, Google Scholar), identify primary studies and their references. The sample will be reduced only to studies that report estimates of coefficients along with their t-statistics, clearly state the details of estimation methodology, and cover European economies. Consequently, I will classify the important characteristics of each study, and determine the summary statistic that will serve as a dependent variable in my regression.

The coefficient estimates are usually not directly comparable among the studies, therefore, they will be standardized and evaluated both in the short and the long run. It is common practice to use for such evaluation so-called "funnel plot", that will detect possible heterogeneity and publication bias. The latter refers to a state when results consistent with a certain theory or with statistical significance are more likely to be published (Stanley, 2005), and can deform the average reform effect. For example, if political expectations encouraged researchers to prefer strong or positive results, the average effect would be skewed. Based on the analysis, I will test for the presence of publication bias and potentially correct the estimates. The regression model that includes variables accounting for differences among the studies will allow to determine the main sources of heterogeneity (similar to Babecky & Campos, 2011) and improve the estimates of reform effect. Finally, I will discuss the magnitudes and compare the responses of GDP to various types of reforms.

Expected Contribution

I will perform a comprehensive quantitative review of the literature estimating the response of economic growth to various types of structural reforms adopted in non-transition countries in Europe. I intend to use the most recent primary studies, modern meta-analysis methods and contribute to the limited number of studies concerning the link between reforms and growth. The thesis aims to be unparalleled in terms of its target countries and the scope of the reforms. The resulting estimates will give an accurate view on the effect different reforms have on the economy and could provide valuable advice that can be broadly used in government decision-making. Therefore, the thesis may have a significant impact on the current policy debate.

Outline
Introduction and motivation: This section will introduce the issue of publication bias, literature, and meta-analyses on the link between reforms and growth.
Studies on reforms and growth: I will explain the most common approaches how researchers measure the reform effect.
Dataset: I will describe the data collection process.
Empirical part: I will explain modern meta-analysis methods, test the presence of publication bias formally and graphically, correct the estimates, and build the regression model.
Discussion: I will discuss my regression results, sources of variation, the magnitude of a reform effect, and differences among the various types of reforms.
Conclusion: I will summarize my findings and their policy implications.

Předběžná náplň práce v anglickém jazyce

Motivation
Structural reforms represent a popular tool for governments aspiring to achieve faster economic growth. Market deregulation, trade, institutional and financial sector reforms, if appropriately applied, may improve factor productivity and bring macroeconomic benefits. For governments designing the optimal policy and aiming to boost their economic performance, the knowledge of the effect that particular reforms have on the economy is of the utmost importance. Hence, over the years this topic has received a lot of attention in the academic community.

Plethora of authors have focused on reforms adopted in various countries, however, often with results that differ in direction or size of the predicted reform effect (McQuinn and Whelan, 2015; Bouis and Duval, 2011). The solution offers a quantitative procedure called 'meta-analysis'. This approach enables to understand the causes of variation and combine the results of multiple studies, thus giving the most objective outcome. Meta-analysis has been widely used in economics, with its application in labour economics, Card et al. (2010) use it to evaluate labour market policies; in resource economics, Havranek et al. (2012) and Sebri (2014) determine the price and income elasticities of gasoline and water, respectively; Doucouliagos and Ulubasoglu (2008) focus on the impact of political democracy on economic growth.

The basis for this thesis form two papers, Babecky and Campos (2011) and Babecky and Havranek (2013). The first identifies the main factors that explain the variation in estimated reform effects, while the latter further improves the analysis by correcting for publication bias and extends the discussion to the magnitude of the reform effect. The focus of both of the studies lies on transition economies. On the other hand, on European non-transition countries there has not been done any meta-analysis yet, which serves as an objective for this thesis.

Hypotheses
Hypothesis \#1: The literature estimating the effect of structural reforms on economic growth is affected by publication bias.
Hypothesis \#2: Numerical estimates of the reform effect depend on the methodology employed to estimate them.
Hypothesis \#3: Average structural reform has a strong positive long-run effect on economic performance.


Methodology
The main aim of the thesis is to investigate the responses of economic growth in Europe to various types of structural reforms using empirical research studies. The principal tool for achieving this objective is meta-regression analysis as described by Stanley (2001).

The first step when conducting meta-analysis is searching for all studies relevant to the topic. For this purpose, I will use standard databases (f.e. RePEc, EconLit, SSRN, Google Scholar), identify primary studies and their references. The sample will be reduced only to studies that report estimates of coefficients along with their t-statistics, clearly state the details of estimation methodology, and cover European economies. Consequently, I will classify the important characteristics of each study, and determine the summary statistic that will serve as a dependent variable in my regression.

The coefficient estimates are usually not directly comparable among the studies, therefore, they will be standardized and evaluated both in the short and the long run. It is common practice to use for such evaluation so-called "funnel plot", that will detect possible heterogeneity and publication bias. The latter refers to a state when results consistent with a certain theory or with statistical significance are more likely to be published (Stanley, 2005), and can deform the average reform effect. For example, if political expectations encouraged researchers to prefer strong or positive results, the average effect would be skewed. Based on the analysis, I will test for the presence of publication bias and potentially correct the estimates. The regression model that includes variables accounting for differences among the studies will allow to determine the main sources of heterogeneity (similar to Babecky & Campos, 2011) and improve the estimates of reform effect. Finally, I will discuss the magnitudes and compare the responses of GDP to various types of reforms.

Expected Contribution
I will perform a comprehensive quantitative review of the literature estimating the response of economic growth to various types of structural reforms adopted in non-transition countries in Europe. I intend to use the most recent primary studies, modern meta-analysis methods and contribute to the limited number of studies concerning the link between reforms and growth. The thesis aims to be unparalleled in terms of its target countries and the scope of the reforms. The resulting estimates will give an accurate view on the effect different reforms have on the economy and could provide valuable advice that can be broadly used in government decision-making. Therefore, the thesis may have a significant impact on the current policy debate.

Outline
Introduction and motivation: This section will introduce the issue of publication bias, literature, and meta-analyses on the link between reforms and growth.
Studies on reforms and growth: I will explain the most common approaches how researchers measure the reform effect.
Dataset: I will describe the data collection process.
Empirical part: I will explain modern meta-analysis methods, test the presence of publication bias formally and graphically, correct the estimates, and build the regression model.
Discussion: I will discuss my regression results, sources of variation, the magnitude of a reform effect, and differences among the various types of reforms.
Conclusion: I will summarize my findings and their policy implications.