The impact of structural reforms on per capita income for a large set of OECD and non-OECD countries show that the quality of institutions matters to a large extent for economic outcomes. This paper shows that countries at different level of economic development face different policy impacts. Furthermore, Product Market Regulation (PMR) effects depend on the level of labour market regulations. Additional findings include:
Better institutions (measured by the rule of law, corruption or government effectiveness) are associated with higher per capita income levels.
More competition-friendly regulations, as measured by the OECD's PMR indicator, improve economic outcomes.
Lower barriers to foreign trade and investment help multi-factor productivity.
Lower barriers to entry and less pervasive state control of businesses boost the capital stock and the employment rate.
No robust link between labour market regulation and MFP and capital deepening could be established.
Looser labour market regulation is found to go hand in hand with higher employment rates.
The quantification of structural reforms: Extending the framework to emerging market economies