Structural reform has become a major issue in Greece, as a critical component of what the country needs to do to get out of the crisis and stimulate economic growth. The discussion of structural reform in the euro zone revolves largely around textbook ideas and simple economic principles. Latin American, Asian, and advanced countries themselves have a rich history of experience with structural reform. This empirical background rarely figures prominently in the discussions, even though it holds important lessons. Key points relate to contextual specificity (desirable reforms vary), prioritization (tackling more binding constraints before others), economics of the second-best (some reforms may well backfire), and function versus form (it’s what institutions do and not how they look that matters).
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