Economic Performance and Political Merit Should We Praise Frente Amplio for Uruguay’s Recent Economic Performance? Evidence Using Synthetic Control Method

How much of a country's economic performance can be attributed to government actions? In this paper we address this question by estimating the impact of the arrival of Frente Amplio to power in Uruguay on the country's per capita GDP. First, we illustrate that Uruguay had an outstanding economic performance in the 2005-2016 period when compared to units that are similar in terms of pre-treatment characteristics and show that this result is robust to the selection of economic performance predictor variables. Second, we show that the estimated effect of Frente Amplio is not statistically significant given that the estimation does not pass the in-space nor the in-time placebo tests. Third, we show that aggregate investment started to have a strong performance before the arrival of Frente Amplio suggesting there might be a contamination in the proposed case study associated to past policies that would lead to an overestimation of the true impact of the Frente Amplio on economic performance