ABSTRACT
Nearly two decades after the start of structural reform programmes supported by the international financial institutions and the donor community, reaching a consensus on the effect of these programmes on growth has proven elusive. A critical step in such an evaluation exercise is the measurement of structural reform efforts. To date, there have been three broad approaches to measuring reforms. Initially, the early studies distinguished only between the presence or absence of structural reform programmes and proceeded to evaluate their effect on growth via ‘with’ or ‘without’ comparisons. Often, the researchers used the number of loans or scale of adjustment lending as indicators of the intensity of structural reform efforts (see McGillivary 1999 for a short survey of empirical methodologies for this approach). Unfortunately, even when used in an econometric regression to separate out the influences of external factors, these measures fail to adequately reflect the varying reform intensities in different countries, resulting in possibly differentiated payoffs. Later, outcome measures, under different components of reform programmes such as outward-orientation, came to be used, as these datasets are easier to assemble (e.g. Easterly et al. 1997). However, the outcome measures approach fails to distinguish between reform efforts by the government and the response of economic agents to these reforms. The response of the agents to reform inputs in itself is a legitimate object of study, and therefore a failure to distinguish between reform input and outcomes is a serious shortcoming. The third and last approach seeks to directly measure structural reform policy inputs, and this is the one we adapt for the current study. The earliest example of direct measures of policy reform efforts was in Agarwala (1983), which focused on price distortions in 31 developing countries by means of seven indicators in three areas of foreign exchange pricing, factor pricing, and product pricing.
