April 2012

No. 6522: On the Reversibility of Structural Reforms

published in: Economics Letters, 2012, 117 (1), 217 - 219

What are the factors that explain reversals in the implementation of structural reforms? Our main hypothesis is that reversals in different reforms are driven by different factors. This paper uses new reform indicators and presents novel evidence showing that (a) FDI inflows reduce the likelihood of privatization reversals, (b) worsened terms of trade increase the probability of external liberalization reversals and (c) labour strikes propel reversals in the liberalization of wages and prices.