orthogonality of the instruments with respect to the error term. (The first-stage regression results are available from the authors upon request.) The IV results from these columns imply that reforms on average lower the unemployment rate by about 1.5 percentage points when controlling for the labor force participation rate of the formal sector.

We next move to the employment level as a dependent variable (Table 3). The right-hand side variables and the exact set of instruments used in each column are the same as in the corresponding column numbers of Table 2. In most columns the coefficient of POST is positive, and is quite significant in four of the eight IV-FE columns. This is despite the fact that, in many of these columns, time and/or time squared have positive and highly statistically significant coefficients. This makes the result especially strong as these controls cover demographical changes and business-cycle effects on labor markets. There is also strong evidence for the positive effect of the size of the working age population. In columns (5), (6), (9) and (10) the first-stage partial R<sup>2</sup> , the Kleibergen-Paap F statistic and the Hansen J p-value do not reject that the set of instruments exhibit a fair degree of correlation with the instrumented variable and are exogenous to the error term In columns (9) and (10), where the set of IVs consists of the external debt-to-GDP ratio interacted with the change in the U.S. Treasury Bill rate (to proxy for the world interest rate), terms of trade, five-year change in democracy score and lagged POST, the results of the Hansen J p-value are even stronger.. Overall, the results are quite robust in those four columns, showing that structural reforms lead to an average employment increase of four million for the entire decade after reforms relative to the decade before reforms. In addition, because the labor force participation rate of the formal sector is being controlled for, the less conclusive results on unemployment after reforms suggests that some of the increase in employment may be coming from informal workers. The sample is heavily weighted by developing countries where informality is ubiquitous (since most developed countries were reformed throughout the period). We acknowledge, though, that this is only a possibility and difficult to evidence from the empirical results presented, given the analysis is carried out for a pooled sample at the country level.

The wage index is our next dependent variable (Table 4). We follow the same sequence of columns in terms of the methods of estimation, right-hand side variables and IVs used. Across all columns in Table 4 the coefficient of POST is positive, and is quite significant in seven of the eight IVFE columns. Once again, this is despite the fact that in most of these columns, both time and time squared have positive and highly statistically significant coefficients. These are very strong results. There is also strong evidence in the IV regression for the negative effect of the size of the working age population, while the sign of real GDP is what one would expect and is significant. Except for columns (5) and (6), everywhere else the first-stage partial R<sup>2</sup> , the Kleibergen-Paap F statistic and the Hansen J p- value support that the set of instruments exhibits the ideal characteristics required of them. In the first stage of columns (3), the external debt-to-GDP ratio and terms of trade significantly increase the probability of reform. The lagged POST variable is also shown to significantly increase the probability of reform for its respective regressions.

Simultaneously including the interaction terms with POST for the wage index (Table 9) yields different results for the IV-FE specifications. In all columns the coefficient on POST remains positive, significant and stronger in magnitude than those observed without the interaction terms. But the coefficient on POST interacted with the labor abundant indicator is now negative throughout and 19