Abstract. What factors drove the global shift towards more market-oriented economic policies over the past three decades? The extant literature posits three main factors impacted policy-making in both the developed and the developing world: policy diffusion, economic constraints, and domestic political actors. Our paper utilizes factor analysis to construct a unidimensional measure of economic liberalization. We then examine whether learning through policy diffusion, economic crisis, and party preferences and fractionalization affect economic liberalization in both the developed and the developing world. In general, we find that policy diffusion had by far the greatest impact on economic policy-making. Economic crises can also help spur reform, but we find little evidence that political parties have systematic effects on economic(pp. 105–124)
JEL: A10, B59, G01
Keywords: political, economic, liberalization, diffusion, crisis, market