Uneven evidence for subsets of policies
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There are 10 Elements listed within the Market liberalization and it’s possible that only a subset of them retain the statistical relationship to the parameters of interest - living conditions, productivity. The results of this test are presented in Figure B.7. As expected one of the dominant components has a stronger relationship with living conditions than the others - the general category of capital markets. Since this category was also constructed from multiple Elements, a second regression was run using 13 independent parameters using each of the individual Elements and found that 3 of 4 retained a strong positive relationship - contract enforcement, financing ecosystem and property rights. The coefficients for the second regression and a listing of the Element measures is presented in Table B.8.
It’s possible that some of the components may shift between the different stages of development, so to test this theory the regression is run split between the three development groups and presented in Table B.9. The results confirm that the coefficients are not constant, but there are some parameters that have a consistent positive relationship for multiple stages, some which have inverted relationships between different stages, and others which show no significant relationship or consistently negative for all stages - FDI barriers, labor market flexibility. Four parameters in particular show consistent strong relationships - burden of regulation, domestic markets, capital markets (same as identified above) and governance.
