How Reform Happens

Key Takeaways

• Richer nations attempt and pass more regulatory reforms.
• Business‑friendliness improves unevenly across regulatory domains.
• Fewer veto points boost reform success, especially for technology.
• Compensation efficiency drives higher reform rates in wealthy countries.
• Reform attempts correlate with success, not with impact magnitude.

Pulse Analysis

Regulatory reform has long been a cornerstone of growth strategies, yet empirical evidence on what actually drives change remains scarce. The National Bureau of Economic Research’s latest paper fills that gap with a novel dataset covering 3,590 reform attempts—both successful and failed—across 189 countries between 2005 and 2022. By cataloguing reforms in administrative, legal, and technological domains, the authors provide the most comprehensive cross‑national view of how governments reshape rules that affect firms, investors, and consumers.

\n\nThe study’s headline finding is that wealthier nations both try and achieve more reforms, but each individual change yields a smaller shift toward business‑friendliness. This paradox is explained through a model that emphasizes three forces: the number of veto points in the legislative pipeline, the social returns to reform, and the cost of compensating losers. \n\nPolicymakers can translate these insights into concrete actions.

Streamlining approval processes to cut veto points—particularly for administrative and legal reforms—should raise success rates, while targeted compensation schemes can mitigate opposition from entrenched interests. The paper also shows that technological reforms enjoy higher success, suggesting that governments seeking quick wins might prioritize digital‑infrastructure or fintech rule changes. As the global economy grapples with post‑pandemic recovery and climate‑related transitions, understanding the mechanics of reform becomes a strategic lever for sustaining growth and competitiveness.