Policy Complementarities and the Washington Consensus

While economists continue to debate whether individual economic policies, such as those contained in Willliamsons (1993) Washington Consensus, can help to spur growth in developing countries, this paper demonstrates that it is groups of policies that are more critical for growth. Policy complementarity is defined as a set of mutually reinforcing policies that create an environment that is conducive to investment and growth. Quantitative measures of policy complementarity are developed, and the study shows empirically, both through an outcomes-based probability framework and standard regression analysis, that these complementarities are significant and robust in explaining growth outcomes over the period 1985-95.