The Expansion of Neoliberal Economic Reforms in Latin America

This article seeks to explain why most Latin American countries have expanded market-oriented reforms since the 1980s despite their generally disappointing economic results. To explain deepening liberal economic reform, we test panel data for 15 Latin American countries from 1980 to 1995, using Beck and Katz' panel-corrected standard errors regression. Controlling for several competing explanations, we find that, except under fragmented party systems, high inflation promotes the expansion of economic reforms. We then show how our results are consistent with Weyland's (1996) use of prospect theory as well as Rodrik's (1994) work on the distributional effects of high inflation.