metadata: authors: 0: author: Nowrasteh,Alex
1: author: Forrester,Andrew C.
2: author: Blondin,Cole
count: Jordan
docna: 0: docna: How Mass Immigration Affects Countries with
            Weak Economic Institutions : A Natural Experiment in Jordan
docty: Policy Research Working Paper
subtopic: International Migration,Migration and Development,Human Migrations & Resettlements,Armed Conflict,International Trade and Trade Rules,Youth and Governance,National Governance,Social Analysis,Quality of Life & Leisure,Government Policies,Public Sector Administrative and Civil
            Service Reform,Democratic Government,Public Sector Administrative & Civil
            Service Reform,State Owned Enterprise Reform,Energy Privatization,De Facto Governments,Privatization,Economics and Finance of Public
            Institution Development
teratopic: Poverty Reduction,Communities and Human Settlements,Conflict and Development,International Economics and Trade,Social Development,Energy,Governance,Private Sector Development,Public Sector Development
abstracts: cdata!: To what extent does immigration affect
            the economic institutions in destination countries? While
            there is much evidence that economic institutions in
            developed nations are either unaffected or improved after
            immigration, there is little evidence of how immigration
            affects the economic institutions of developing countries
            that typically have weaker institutions. Using the Synthetic
            Control Method, this study estimates a significant and
            long-lasting positive effect on Jordanian economic
            institutions from the surge of refugees from the First Gulf
            War. The surge of refugees to Jordan in 1990–1991 was
            massive and equal to 10 percent of Jordan's population
            in 1990. Importantly, these refugees were able to have a
            large and direct impact on Jordanian economic institutions
            because they could work, live, and vote immediately upon
            entry due to a quirk in Jordanian law. The refugee surge was
            the main mechanism by which Jordan's economic
            institutions improved in the decades that followed.
geo_reg_key: 517202,517191
repnme: repnme: How Mass Immigration Affects Countries with
            Weak Economic Institutions : A Natural Experiment in Jordan
display_title: How Mass Immigration Affects
            Countries with Weak Economic Institutions : A Natural
            Experiment in Jordan
listing_relative_url: /research/2019/04/30977773/mass-immigration-affects-countries-weak-economic-institutions-natural-experiment-jordan
topicv3: Political Economy of Reform m1326263 836,Trade m1326924 698,Privatization m1327236 1283,Political Violence and War m1327310 2462,Immigration m1504162 2837
publishtoextweb_dt: 2019-04-11T00:00:00Z
historic_topic: Poverty Reduction,Communities and Human Settlements,Conflict and Development,International Economics and Trade,Social Development,Energy,Governance,Private Sector Development,Public Sector Development
no_of_pages: 25
model_extractions: Policy Research Working Paper 8817 How Mass Immigration Affects Countries with Weak Economic Institutions A Natural Experiment in Jordan _Alex Nowrasteh Andrew C. Forrester Cole Blondin_ Development Economics Vice Presidency Strategy and Operations Team April 2019
Policy Research Working Paper 8817

# **Abstract**

To what extent does immigration affect the economic institutions in destination countries? While there is much evidence that economic institutions in developed nations are either unaffected or improved after immigration, there is little evidence of how immigration affects the economic institutions of developing countries that typically have weaker institutions. Using the Synthetic Control Method, this study estimates a significant and long-lasting positive effect on Jordanian economic institutions from the surge of refugees from the First Gulf War. The surge of refugees to Jordan in 1990–1991 was massive and equal to 10 percent of Jordan’s population in 1990. Importantly, these refugees were able to have a large and direct impact on Jordanian economic institutions because they could work, live, and vote immediately upon entry due to a quirk in Jordanian law. The refugee surge was the main mechanism by which Jordan’s economic institutions improved in the decades that followed.

This paper is a product of the Strategy and Operations Team, Development Economics Vice Presidency. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/ research. The authors may be contacted at anowrasteh@cato.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# **How Mass Immigration Affects Countries with Weak Economic Institutions: A Natural Experiment in Jordan**

## **Alex Nowrasteh, Andrew C. Forrester, and Cole Blondin**

**JEL classification:** P1, J6, P16, F22

**Keywords:** Jordan, institutions, immigration, refugees, governance

### **1. Introduction**

The economic benefits of immigration are large. Persistent global wages differences for observably identical workers indicate that economic efficiency losses from immigration barriers are large and one or two orders of magnitude larger than the losses resulting from barriers on trade and capital flows (Clemens 2011).

However, immigrants could alter destination countries’ economic institutions that are vital causes of economic development and the source of the vast observed differences in worker productivity between nations (Acemoglu and Robinson 2012; Dell 2010; Rodrik, Subramanian, and Trebbi 2004). The economist George Borjas argued that the “the entry/exit of perhaps hundreds of millions of people” would likely have a negative impact on the institutions of developed countries perhaps even to the point of wiping out all of the expected efficiency gains from immigration (Borjas 2015). Thus, the efficiency gains from liberalized immigration to the developed world hold only if the immigrants do not import negative social Alex Nowrasteh (corresponding author) is the senior immigration policy analyst at the Cato Institute, Washington, DC; his email is anowrasteh@cato.org. Andrew C. Forrester is a research associate at the Cato Institute, Washington, DC; his email is aforrester@cato.org. Cole Blondin is a student at Middlebury College, Middlebury, VT; his email is ctblondin@gmail.com.
2 Nowrasteh, Forrester, and Blondin capital to the extent that it overwhelms and degrades the destination-country’s institutions (Clemens and Pritchett 2019).

Much research has subsequently examined how immigration affects economic institutions in destination countries. Clark et al. (2015) find a positive and statistically significant relationship between both initial stocks and flows of immigrants with improvement in the economic freedom score from 1990 to 2011. Clemens and Pritchett built a novel epidemiological model that assumes immigrants bring stagnation factors with them, finding no real-world impact (Clemens and Pritchett 2019). Powell, Clark, and Nowrasteh (2017) examine a natural experiment whereby Israel absorbed a massive exogenous shock of Jewish refugees from the Soviet Union that substantially improved its economic institutions.

The existing research is primarily focused on the impact of immigrants on the economic institutions of developed nations. This paper expands the literature by examining immigration’s impact on a country with much weaker economic institutions: Jordan.

In 1990 and 1991, about 300,000 Palestinians were expelled from Kuwait by Saddam Hussein’s invasion and could not return after the war (van Hear 1992; Colton 2002). These Kuwaiti-Palestinian refugees were forced to take refuge in Jordan where, due to a quirk of Jordanian law, they arrived as citizens who could vote, work, own property, and otherwise influence the political and economic system of Jordan even though most of them had never lived in Jordan before. The surge of 300,000 Kuwaiti-Palestinians was equal to about 10 percent of Jordan’s pre-surge population. To make it more challenging, the KuwaitiPalestinians arrived during a severe recession in a country with weak economic institutions.

Natural experiments like these are valuable because they remove concerns about endogeneity. Economists have successfully used natural experiments to study how exogenous immigration shocks affect labor markets (Borjas 2015). This paper uses the Synthetic Control Method (SCM) to measure how the immigrants affected Jordan’s economic institutions (Abadie and Gardeazabal 2003; Abadie, Diamond, and Hainmueller 2010, 2015; Peri and Yasenov 2017). SCM makes it possible to weight pre-surge economic institutional quality scores in various countries to create a counterfactual Synthetic Jordan. The Synthetic Jordan’s economic institutional quality score is charted after 1990 as if no refugee surge had occurred and provides a comparison to Real Jordan. The refugee surge can thus plausibly explain the difference between Real Jordan and Synthetic Jordan after the intervention date.

The next section provides a brief history of institutions in Jordan and the 1990–1991 exogenous surge of Kuwait-Palestinian refugees. Section 3 focuses on the upsides and downsides of using Jordan as a natural experiment. Section 4 describes the data used. Section 5 explains the methodology. Section 6 includes the results and robustness tests. Section 7 discusses how the SCM results are consistent with Jordan’s history of institutional change. Section 8 concludes.

# **2. Jordan’s Institutional History and the Refugee Surge**

Jordan is a small Middle Eastern country that became fully independent in 1946. It is bordered by Iraq, Israel, Saudi Arabia, Syria, and the West Bank. The original inhabitants of Jordan are called Transjordanians.

The Jordanian Government and Economic Institutions Prior to the Refugee Surge The Jordanian government is an authoritarian monarchy advised by a strong cabinet with a parliament that swings between extremes of total acquiescence to the monarchy and partial openness (Richards 1993). In practice, the Jordanian monarch shares power with parliament, a cabinet, and the Legislative Council that includes religious and ethnic minorities in a wide governing coalition (Alon 2007; Piro 1998). Over Jordan’s history, Jordanian kings incorporated growing minority and interest groups into the governing coalition (Lucas 2003; Richards 1993). For instance, Palestinians who arrived as refugees in 1949 earned citizenship, but the government denied them access to many state benefits, employment in state-owned enterprises (SOE), and employment by the state itself (Brynen 1992).
3 Economically, Jordan adopted an import substitution industrialization (ISI) development policy after 1950 whereby Transjordanians were offered employment in large SOEs, employment in Jordan state agencies and the military, and government subsidies for consumer goods (Piro 1998). Palestinians paid high taxes, were heavily regulated, and could not access credit due to government financial favoritism for large SOEs. Few Palestinians were part of the governing coalition in the 1980s and never in proportion to their numbers (Sütalan 2006). The distinction between the governing Transjordanians who received government benefits and the Palestinians who worked in the private economy produced a politically tense situation by 1990.

Foreign loans, foreign aid, monopoly rents, high taxes on the small Palestinian-dominated private sector, and worker remittances propped up the underperforming Jordanian economy until the late 1980s (Knowles 2005; De Bel-Air 2007; Gelos 1995; Brynen 1992; Piro 1998). In 1989, chronic inflation produced a 60 percent devaluation of the Jordanian currency as the government was perilously close to defaulting on several international loans (Kanaan and Kardoosh 2003; El-Sakka 2007; Amerah 1993). Jordan called in the International Monetary Fund (IMF) and the World Bank for assistance. The government held elections in 1989 during an economic crisis, the Palestinian Intifada in neighboring Israel, and domestic unrest in opposition to loan conditions from the International Monetary Fund and World Bank (Lucas 2003).

The first IMF agreement sought to reduce Jordan’s budget deficit, reform taxes, reduce inflation, institute more prudent debt management, and reduce protectionism to stimulate export-based development in exchange for debt rescheduling (Richards 1993; U.S. Department of State 1995). Shortly thereafter, the First Gulf War deepened the recession, so the IMF delayed the signature of the first agreement due to the political strain it placed on Jordan’s government (Swaidan and Nica 2002; Piro 1998). In 1991, a second IMF agreement placed a temporary moratorium on debt payments in exchange for additional economic reforms (Richards 1993). The Jordanian government published a National Charter in July 1991 to gradually introduce democratic reforms, include Palestinians in the governing coalition, support free market economic reforms, and protect private property (Knowles 2005; Maktabo 1998; Richards 1993; Brynen 1992; Sütalan 2006; Robinson 1998). The World Bank also suspended repayments until 1992 (World Bank 1995).

From 1975 to 1990, Jordan fell from the 49th freest economy in the world to the 54th according to the economic freedom of the world (EFW) score (Gwartney, Lawson, and Hall 2017). During the same period Jordan’s chain-linked EFW score rose from a low of 5.37 in 1975 to 5.65 in 1990. The shrinking economy, regional political instability, war, and a precarious situation with foreign lenders made the timing difficult to absorb a massive surge of refugees or reform economic institutions (Gelos 1995; Troquer and al Oudat 1999; Mruwat, Adwan, and Cunningham 2001; Manuel 1991).

# Refugees in Jordan

Jordan has absorbed many waves of refugees, especially Palestinians who arrived after the Arab-Israeli War ended in 1949 and after the Six Day War in 1967. The United Nations Relief and Works Agency for Palestinians counts the Palestinian refugees and their descendants born afterward as refugees so it is difficult to estimate the total number of Palestinians who entered Jordan in surges after 1949. According to one estimate, there were a total of 100,000 Palestinian refugees on the East Bank of the Jordan River in 1949, roughly equal to a quarter of Jordan’s population at the time (Piro 1998). Jordan also temporarily extended its sovereignty over the West Bank, which brought Jordan’s total Palestinian population to over 500,000 (Migration Policy Center 2013).

Jordan integrated the Palestinians by granting citizenship to those in its territory in 1954 and to all Palestinians living in the West Bank and their descendants—an action with important ramifications when the Kuwaiti-Palestinians began to arrive in 1990 (Maktabo 1998). In 1988, Jordan relinquished territorial claims on the West Bank and adjusted citizenship laws to exclude Palestinians from the West Bank who had
4 Nowrasteh, Forrester, and Blondin two-year Jordanian passports from Jordanian citizenship, thus limiting citizenship to Palestinians living in Jordan and Palestinians with five-year Jordanian passports (British Refugee Council 1994). Palestinians who lived in Kuwait held the five-year Jordanian passport.

Saddam Hussein’s unexpected invasion of Kuwait on August 2, 1990, created two waves of refugees to Jordan. The first lasted from August 3 to November of that year, during which nearly 1.2 million refugees from Iraq, Kuwait, and other states travelled to Jordan (van Hear 1992; Mruwat, Adwan, and Cunningham 2001; UNDRO 1990). About 800,000 refugees were repatriated within two weeks of arrival, but about 230,000 were Kuwaiti-Palestinians with five-year Jordanian passports (UNDRO 1990; Mruwat, Adwan, and Cunningham 2001). A second wave of about 65,000 Kuwaiti-Palestinians arrived in Jordan from March to August 1991 (van Hear 1992; Troquer and al Oudat 1999). The first wave of KuwaitiPalestinians fled Saddam Hussein’s invasion, and the second wave were expelled by the Kuwaiti government in what the king of Kuwait called a “cleansing” (van Hear 1992; Haddad 2010; Kuttab 2005; Ibrahim 1991; Rosen 2012).

Many of the Kuwaiti-Palestinian refugees had been working and living in Kuwait for decades, and the majority had never lived in Jordan. They moved to Kuwait from the West Bank in two waves from the 1940s to the 1970s, and over 90 percent had been out of the West Bank for more than 10 years, 43 percent for more than 20 years, and nearly a quarter had emigrated prior to 1960 (Troquer and al Oudat 1999). Jordan’s grant of citizenship did not require residence, so the refugees could immediately work, live, vote, lobby the government, and affect Jordan’s economic institutions even though they “were unfamiliar with Jordanian culture and were economically maladapted to a country in which most had never lived” (van Hear 1995; Troquer and al Oudat 1999).

Kuwaiti-Palestinians, faced with circumstances as bad as anything Palestinians had experienced in the past, fled to a new country with unfamiliar culture and institutions. Anti-Palestinian sentiment in Jordan was strong. “They have their own country; let them go and live there” was a common Transjordanian sentiment (Mruwat, Adwan, and Cunningham 2001). Many Palestinians considered their own displacement from Kuwait as equivalent to the personal and socio-economic impacts of the Arab-Israeli War and the Six Day War (van Hear 1992). Yasser Arafat, head of the Palestinian Liberation Organization, said, “What Kuwait did to the Palestinian people is worse than what has been done by Israel to Palestinians in the occupied territories” (Rosen 2012).

# **3. Jordan as a Natural Experiment**

The movement of Kuwaiti-Palestinians into Jordan was an exogenous shock caused by outside actions and not by changes in Jordan’s economy, policy, or institutions, and thus an excellent example of a natural experiment.

First, Saddam Hussein’s invasion of Kuwait was unexpected by Jordan, Kuwait, the KuwaitiPalestinians, and the rest of the world. The surge of refugees was so sudden that they began to leave Kuwait for Jordan the day after the invasion of August 2, 1990 (UNDRO 1990). In September 1990, the Jordanian government did not even realize that many of the refugees were Jordanian citizens and didn’t know how many would arrive (UNDRO 1990).

Second, there was no change in Jordanian policy that attracted the Kuwaiti-Palestinians. The 1988 reform to the citizenship laws did not affect the Kuwaiti-Palestinians who already held five-year Jordanian passports. Jordan was poorer than Kuwait, suffering through a serious economic contraction that worsened during the Gulf War, and Kuwaiti-Palestinian salaries in Jordan were approximately 30 percent of the average monthly pay in Kuwait (Colton 2002; Gelos 1995).

Third, the number of Kuwaiti-Palestinian refugees was about 10 percent of Jordan’s pre–Gulf War population. By contrast, the surge of _Marielitos_ to Miami in 1980, a famous natural experiment in the immigration literature, was just 7 percent of Miami’s pre-Mariel population. The Kuwaiti-Palestinians
5 were confined to Jordan unlike the _Marielitos_ , many of whom eventually left Miami (Peri and Yasenov 2017).

Fourth, Kuwaiti economic institutions were of lower quality than Jordan’s in 1990, so the KuwaitiPalestinians were not going to bring experience of superior economic institutions with them (Gwartney, Lawson, and Hall 2017). Kuwait had the 70th-freest economy in the world in 1990 compared to Jordan’s rank of 54.

Fifth, the substantial population of Palestinians already living in Jordan strengthens the case that this is an exogenous shock that would quickly impact Jordanian institutions. The Kuwaiti-Palestinian refugees faced lower transaction costs to enter established political and economic networks occupied by their coethnics. Instead of spending time learning about local politics, the Kuwaiti-Palestinians had an immediate impact on Jordan’s economic institutions facilitated by networks of their longer-settled co-ethnics (van Hear 1998). This is similar to how the large population of Cubans living in Florida in 1980 helped facilitate the rapid labor market integration of _Marielitos_ . Refugee surges tend to upset ethnic balances and produce governing tensions and sometimes civil war, especially when the refugees possess ethnic ties with large groups in the host country (Buhaug and Gleditsch 2008; Salehyan and Gleditsch 2006). The surge’s upsetting of ethnic balances and the governing coalition explain Jordan’s subsequent economic reforms.

The last and best feature of this sudden natural experiment is that the Kuwaiti-Palestinians had full legal, political, and economic rights immediately upon entering Jordan, a situation unique in the Arab world (Zureik 1994).

Three features of this exogenous shock make it less useful as a natural experiment. The first is that the Kuwaiti-Palestinians were overwhelmingly Sunni Muslims, just like Jordan’s population. The second is that Jordan did not have a democracy like other nations that accepted large numbers of immigrants. Jordanians voted in the 1989 elections and expected future elections, but their impact on policy through voting was limited. Third, Jordan did not have a welfare state as large as those in the developed world (Brynen 1992).

# **4. Data**

This study uses Gwartney, Lawson, and Hall (2017) Economic Freedom of the World Annual Report (EFW) to measure changes in Jordan’s economic institutions. The EFW index is a reasonable proxy for economic institutions, incorporating 42 variables collected from numerous sources (including the World Bank and IMF) across five categories including the size of government, legal structure and property rights, access to sound money, freedom to trade internationally, and regulation of credit, labor, and business (Powell, Clark, and Nowrasteh 2017; Feldmann 2017). The EFW index ranges from 0 to 10, in which a higher score denotes a greater level of economic freedom. Polity IV is used as a measure of democratic political institutions (Center for Systemic Peace 2018). The Polity IV index measures how democratic a country’s political institutions are on a scale of –10 to +10, in which a higher score denotes a more democratic government.

Political liberalization in Jordan in 1989 was not a permanent transition toward democracy and it occurred before the refugees arrived (Sütalan 2006). In contrast, the economic institutions did change permanently and rapidly after the surge of Kuwaiti-Palestinians. The study relies on the EFW index as the outcome of interest as it represents economic reforms (Sütalan 2006). EFW scores were originally calculated in five-year intervals with most countries’ series of scores beginning in 1975, and on an annual basis following 2000. The uneven spacing of EFW time series and relatively short time series of observed EFW scores prior the Jordanian refugee surge in 1990 are two potential problems. The study therefore conducts multiple specification checks that probe the sensitivity of the results to avoid overstating the precision of our findings.
N+1 T= Yj - > wYj. j=2
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9

**Table 2.** Goodness of Fit Estimates for Synthetic Jordan, EFW Index

||**OIC All**|**OIC Minus PAK**|**OIC SAL**|
|---|---|---|---|
|_Pre-treatment fit_||||
|(1) RMSPE|0.097|0.104|0.119|
|_Permutation tests_||||
|(2) Pr(post RMSPE≥Jordan)|0.154|0.077|0.000|
|(3) Pr(pre/post RMSPE≥Jordan)|0.308|0.231|0.000|
|(4) Pr(pre RMSPE≥Jordan)|0.692|0.769|0.875|

_Source_ : Authors’ analysis of the Gwartney, Lawson, and Hall (2017) Economic Freedom of the World (EFW) index. Additional data come from the Polity IV dataset, Freedom House, the Database of Political Institutions (DPI), and the JuriGlobe database. _Note_ : Table presents goodness of fit metrics for Synthetic Jordan with the EFW index as the outcome of interest. Goodness of fit for Synthetic Jordan is denoted by its Root Mean Squared Prediction Error (RMSPE). Placebo tests reassign the 1990 refugee surge to each control country and report the fraction of countries with a posttreatment RSMPE greater than Jordan’s RMPSE, normalized ratio of pre- to post-treatment RMSPE greater than Jordan’s RMSPE, and pre-treatment RMSPE greater than Jordan’s. OIC denotes the full Organisation of Islamic Cooperation donor pool; OIC minus PAK denotes the OIC donor without Pakistan; and OIC SAL denotes the donor pool limited to OIC countries that received Structural Adjustment Loans (SALs) from either the World Bank or International Monetary Fund (IMF).

**Table 3.** Predictor Balance for Synthetic Jordan

||**Real**<br>**Jordan**|**Sample**<br>**means**|**OIC**<br>**All**|**OIC**<br>**minus PAK**|**OIC**<br>**SAL**|
|---|---|---|---|---|---|
|EFW (1975)|4.830|4.663|4.921|4.926|4.893|
|EFW (1985)|5.500|4.546|5.456|5.483|5.482|
|Political rights|5.667|5.143|5.556|5.462|5.489|
|Civil liberties|5.667|5.143|5.561|5.477|5.525|
|Exec. constraints|1.333|0.238|1.907|1.854|1.917|
|Presidential|1.000|0.595|0.328|0.232|0.297|
|Parliamentary|0.000|0.190|0.034|0.001|0.031|
|Civil law|1.000|0.643|0.899|0.998|0.908|
|Common law|0.000|0.357|0.101|0.002|0.092|
|Muslim law|1.000|0.714|0.739|0.769|0.774|

_Source_ : Authors’ analysis of the Gwartney, Lawson, and Hall (2017) Economic Freedom of the World (EFW) index. Additional data come from the Polity IV dataset, Freedom House, the Database of Political Institutions (DPI), and the JuriGlobe database. _Note_ : Table presents pre-treatment predictor variables for Jordan, their corresponding pre-treatment sample means, and the weighted averages used to construct Synthetic Jordan. OIC denotes the full Organisation of Islamic Cooperation donor pool; OIC minus PAK denotes the OIC donor without Pakistan; and OIC SAL denotes the donor pool limited to OIC countries that received Structural Adjustment Loans (SALs) from either the World Bank or International Monetary Fund (IMF). ‘Political rights’ and ‘civil liberties’ refer to the respective Freedom House Freedom in the World report indexes. ‘Executive constraints’ reference to the Polity IV measure of executive constraints _xconst_ , ‘Presidential’ and ‘parliamentary’ are dummies equal to one for countries with presidential or parliamentary political systems as recorded in the DPI, respectively. Civil, Common, and Muslim law are dummies equal to one for a country’s legal system belonging to each category as reported by the JuriGlobe database.

Table 2 presents goodness of fit indicators for the Synthetic Jordans. The first row indicates the specification’s Root Mean Square Predicted Error (RMSPE), which measures the distance between the synthetic control unit and the predictors used to construct it during the pretreatment period. The predictor variables and their weighted values are listed in table 3, and the country weights for each specification are listed in table 4.

Table 1 column (1) is the preferred model, as it constructs Synthetic Jordan from the Full OIC list of countries with an EFW score and has the best pretreatment fit with an RMSPE of 0.097. Table 2 and Figure 1 show that Real Jordan had a gap of 0.204 in the Full OIC’s first post-treatment year of 1995 but a _p_ - value of 0.692, meaning that Real Jordan’s EFW score was 0.204 points above Synthetic Jordan and the difference is insignificant. Although the gap is insignificant, the trend changed beginning in 1990 and Real Jordan’s EFW score is significantly higher in 2000, 2005, and 2010 with a _p_ -value of 0.0 in each year. In those statistically significant years, the gap between Synthetic Jordan’s projected EFW score and its actual score was 1.15 points in 2000, 1.06 points in 2005, and nearly 0.80 points in 2010. These
10 Nowrasteh, Forrester, and Blondin

**Table 4.** Synthetic  Jordan Country  Weights

||**Weight**|||**Weight**|
|---|---|---|---|---|
|||**_Panel A. OIC All_**|||
|Mali|0.261||Turkey|0.000|
|Niger|0.000||Egypt|0.000|
|Sierra Leone|0.000||Syria|0.000|
|Nigeria|0.000||Pakistan|0.101|
|Morocco|0.000||Bangladesh|0.000|
|Tunisia|0.000||Malaysia|0.000|
|Iran|0.000||Indonesia|0.638|
|||**_Panel B. OIC Minus PAK_**|||
|Mali|0.231||Turkey|0.000|
|Niger|0.000||Egypt|0.086|
|Sierra Leone|0.000||Syria|0.000|
|Nigeria|0.000||Pakistan|–|
|Morocco|0.000||Bangladesh|0.002|
|Tunisia|0.000||Malaysia|0.000|
|Iran|0.000||Indonesia|0.681|
|||**_Panel C. OIC SAL_**|||
|Mali|0.226||Turkey|0.000|
|Niger|0.000||Egypt|–|
|Sierra Leone|0.000||Syria|–|
|Nigeria|–||Pakistan|0.092|
|Morocco|0.000||Bangladesh|0.000|
|Tunisia|0.010||Malaysia|–|
|Iran|–||Indonesia|0.672|

_Source_ : Authors’ analysis of the Gwartney, Lawson, and Hall (2017) Economic Freedom of the World (EFW) index. Additional data come from the Polity IV dataset, Freedom House, the Database of Political Institutions (DPI), and the JuriGlobe database. _Note_ : Table presents estimated country weights to construct Synthetic Jordan based on the EFW index as the outcome. OIC denotes the full Organisation of Islamic Cooperation donor pool; OIC minus PAK denotes the OIC donor without Pakistan; and OIC SAL denotes the donor pool limited to OIC countries that received Structural Adjustment Loans (SALs) from either the World Bank or International Monetary Fund (IMF).

sizable gaps in Real and Synthetic Jordan’s EFW score in 2000 and 2005 correspond to a difference in EFW score of more than one standard deviation (see table S1.2 in the supplementary appendix S1). This result suggests that the improvements in economic institutions resulting from the refugee shock led to long-term improvements in Jordanian economic institutions.

Table 1 columns (3) and (5) are the gaps between the Real Jordan and Synthetic Jordans constructed from the OIC (minus Pakistan) and OIC-SAL pools of countries. These fits are poorer as the pretreatment RMSPE for OIC (minus Pakistan) and OIC-SAL were 0.104 and 0.119, respectively. However, the increase in Real Jordan’s EFW relative to the Synthetic Jordans in these two additional donor pools are similarly large to the preferred Full OIC specification and statistically significant in the same years of 2000, 2005, and 2010.

The RMSPEs in table 2 rows (2), (3), and (4) show the degree to which Synthetic Jordan fits Real Jordan - relative to the placebo synthetic control in pretreatment and post-treatment periods. Relatively high _p_ values show that a large proportion of the placebo synthetic control units have a worse fit than Synthetic Jordan, which provides evidence in favor of the Full OIC “donor pool.”

# Economic v. Political Liberalization

Lastly, we consider whether the refugee surge impacted political institutions. The study constructs a Synthetic Jordan based on the donor pool of 14 OIC countries with the Polity IV index as the outcome variable. The results in figure 3 panel (a) and supplementary appendix table S1.3 show a discrete jump in Jordan’s Polity IV score from 1988 to 1989 but that the OIC countries are a poor pretreatment
<!-- Start of picture text --> (a) ©~)— Real Jordan |<br>—— OIC-All<br>wo OIC-SAL - Refugee Surge<br>I<br>I<br>ire}N|I<br>I<br>x|<br>o I<br>To=2< |I|<br>Bo<br>oF |<br>a I<br>ire) I<br>I<br>I<br>|<br>2 |<br>y<br>2<br>1975 1980 1985 1990 1995 2000 2005 2010 2015<br>(b) wo~<br>elugee Surge<br>q~Ref Ss .|l —— RealDonor JordanPool<br>°|<br>~ 1<br>X io I<br>oN<br>||<br>>|<br>ry<br>= 0<br>& N<br>¢<br>2 o beh dee<br>Ww<br>~~ A<br>= *<br>oO<br>—& 4<br>®<br>2 w<br>rs<br>2<br>wo<br>N<br>ed<br>1975 1980 1985 1990 1995 2000 2005 2010 2015<br><!-- End of picture text -->
12 Nowrasteh, Forrester, and Blondin relative to the universe of potential synthetic controls. Results in table S1.3 show that there is no evidence of a statistically significant divergence in Polity IV scores caused by the 1990 refugee surge.

# **7. Discussion**

Successive Jordanian governments wanted to liberalize and privatize much of the state-dominated economy prior to the surge of Kuwaiti-Palestinian refugees in 1990, but the poor economy and a strong Transjordanian-dominated political coalition halted their efforts. The surge of Kuwait-Palestinians upset the ethnic balance enough to prompt a change in the ethnic composition of the governing coalition by including Palestinians who favored liberalization and privatization. The widening of membership in the governing coalition to include a group that supported liberalization and privatization was responsible for the committed and sustained economic reforms that followed. Furthermore, the Kuwaiti-Palestinians caused a surge in Jordanian economic activity that produced enough growth to make the promarket reforms politically sustainable.

## Economic Reform Prior to the Kuwaiti-Palestinians

Several proposed economic liberalizations in Jordan failed in 1985, 1986, and 1989 (Knowles 2005; Brynen 1992). In 1989, Jordan’s worsening economy and growing debt prompted the country to seek an emergency aid and debt-relief loan package from the IMF. According to Prime Minister Mudar Badran in February 1990, that “economic reform program is principally based on improving the efficiency of the public sector and reducing it as far as possible; and on increasing, broadening, and diversifying the private sector’s investment opportunities” (Knowles 2005). The loans were supposed to incentivize Jordan to liberalize its economy, but the IMF cancelled the conditions after the refugees arrived (Troquer and alOudat 1999).

The IMF loans diminished political support for the Jordanian government prior to the KuwaitiPalestinian refugee surge. The IMF reforms were so unpopular that they sparked riots in the town of Ma’an, a political base of Bedouin support for the monarchy (Kanaan and Kardoosh 2003; Ryan 2003; Amerah 1993). The anti-IMF riots spread to other Transjordanian-populated cities in the south that were supposedly the bedrock of the monarchy’s popular support (Sütalan 2006).

Transjordanians opposed liberalization because they were the beneficiaries of the state-dominated economic system (World Bank 1995). Reducing government expenditures, privatizing industries, and liberalizing the economy would have diminished the incomes of Transjordanians while benefiting the private sector Palestinians (Sütalan 2006). The economic and debt crises, diminishment of Transjordanian political support, and a large Palestinian population created a fragile political situation on the eve of the surge of Kuwaiti-Palestinian refugees in 1990.

## Refugees Jump-Started and Sustained the Economic Reforms

The regime’s desire to survive is why the surge of Kuwaiti-Palestinians led to economic liberalization instead of political repression. The Jordanian monarchy has survived by mostly incorporating political, ethnic, religious, regional, tribal, and economic groups into its governing coalition rather than attempting to destroy them (Mufti 1999).

The economy was in dire straits when the Kuwaiti-Palestinians arrived in 1990. The following year, the refugees expanded the size of the labor force by 12 percent and accounted for 27 percent of the unemployed (Amerah 1993; van Hear 1998). The Jordanian government erroneously estimated that GDP declined by 30 percent in the last five months of 1990 (Piro 1998). As the Jordanian government saw it, their most important task was to get the refugees working without expanding the public sector (al Khouri 2007; Troquer and al Oudat 1999).

In January 1991, Prime Minister Mudar Badran favored liberalization and privatization with the goal of guaranteeing the survival of the state (Mufti 1999; Knowles 2005). Prime Minister Taher al-Masri
13 succeeded Badran in mid-1991 and continued his policies by saying that it is “no longer reasonable that the public sector should assume the responsibility of running commercial and industrial companies and institutions, or interfere ... in pricing policies, and confiscate the freedom of the private sector” (Knowles 2005). The immediate beneficiaries were the long-settled Palestinians who already dominated the private sector and the newly arrived Kuwaiti-Palestinians eager to enter the workforce and start firms (Richards 1993; Brynen 1992; Piro 1998; Sütalan 2006).

The refugees upset the ethnic balance between Transjordanians and Palestinians and created an opportunity for the monarchy to gain Palestinian support to help compensate for the diminishment of Transjordanian support (Richards 1993). The Transjordanians attempted to forestall such an expansion of the governing coalition by adopting anti-Palestinian policies by severing political ties with the West Bank in 1988, limiting Palestinian immigration, decreasing Palestinian representation in Parliament, and considering a peace treaty with Israel (Mufti 1999; Brynen 1992; Sütalan 2006).

Previous aborted reform efforts in 1985, 1986, and 1989 were followed by increased government spending on Transjordanian public sector managers, rent seekers, and bureaucrats who dominated the governing coalition (Piro 1998; Sütalan 2006). The addition of proliberalization Palestinians to the governing coalition because of the refugee surge broke the antireform cycle (Piro 1998; Brynen 1992). In June 1991, the king included a record seven Palestinian ministers in his proreform government (Kimmerling and Migdal 2003).

Unlike previous reforms, the early-1990s’ economic reforms were intended to improve the business climate for the Palestinian-dominated private sector (Richards 1993). King Hussein’s National Charter in June 1991 distinguished the latest round of reforms from earlier failed attempts, affirmed protection for private-property rights and free markets, and was a conciliatory message to Palestinians (Robinson 1998).

The Palestinian coalition made the economic reforms more radical. Initially the government proposed cutting taxes on income and capital and replacing the revenue with a national sales tax. The Palestiniandominated small business sector supported the tax cuts on capital and income but successfully delayed the sales tax’s implementation by years, convinced the government to exempt many goods altogether, and to reduce the proposed maximum rate (Knowles 2005). They also lobbied against licensing, regulatory barriers to entry, and trade restrictions that prevented them from importing their property from Kuwait (van Hear 1995; Gelos 1995; Troquer and al Oudat 1999; Zaghal and Freij-Dergarabedian 2004; UNDRO 1990).

One reason the government was able to sustain the reforms is that the refugees caused an unexpected economic and employment boom (van Hear 1995). Jordanian GDP shrank by 10.7 percent in 1989 and a further 0.3 percent in 1990 but grew by 1.6 percent in 1991 and 14.4 percent in 1992 (World Bank 2017). In 1992, Jordan ran a balanced budget for the first time in the country’s history (van Hear 1995; Sab 2014). Total factor productivity growth accelerated in the early 1990s, and macroeconomic indicators like inflation, investment as a percent of GDP, and real GDP growth improved markedly immediately after the refugee surge (Sab 2014; Kanaan and Kardoosh 2003). The refugees boosted the supply side by starting firms in the construction, retail, financial, commercial, and industrial sectors (Troquer and al Oudat 1999). They also invested capital in Jordan, compensating for the decline in remittances from oil workers expelled during the Gulf War (Troquer and al Oudat 1999; Athamneh 2012; El-Sakka 2007; Migration Policy Center 2013). Total investment as a percentage of GDP peaked at over 35 percent in 1993 as the refugees repatriated billions in investment from their accounts in Kuwait (Sab 2014; Troquer and al Oudat 1999; British Refugee Council 1994). The annual trade on Amman’s stock market more than doubled from 1990 to 1992, foreign exchange reserves increased tenfold, and the net foreign assets of the central bank and monetary system more than doubled (van Hear 1995; Gelos 1995; Ebrahimi 1996).
14 Nowrasteh, Forrester, and Blondin

**Table 5.** EFW, Polity IV, and Freedom House Indexes, Jordan v. Kuwait

||**Total**<br>**index**|**Size of**<br>**gov.**|**Legal**<br>**system**|**Sound**<br>**money**|**Internatl.**<br>**trade**|**Regulation**|**Polity II**|**Political**<br>**rights**|**Civil**<br>**liberties**|
|---|---|---|---|---|---|---|---|---|---|
||||||_Panel A._|_Jo_<br>_rdan_||||
|1975|4.83|1.53|.|5.65|5.76|6.40|−10.00|6.00|6.00|
|1980|5.13|4.77|1.81|6.82|5.76|6.49|−10.00|6.00|6.00|
|1985|5.50|4.60|2.74|7.74|6.00|6.42|−9.00|5.00|5.00|
|1990|5.43|6.12|3.10|6.20|4.81|6.93|−4.00|5.00|5.00|
|1995|6.14|5.71|4.63|7.15|6.63|6.61|−2.00|4.00|4.00|
|2000|7.06|6.08|5.09|9.67|7.22|7.17|−2.00|4.00|4.00|
|2005|7.30|6.27|5.28|9.21|7.94|7.81|−2.00|5.00|4.00|
|2010|7.45|7.35|4.79|9.12|7.89|8.08|−3.00|6.00|5.00|
|2015|7.47|7.38|4.76|9.66|7.63|7.91|−3.00|6.00|5.00|
||||||_Panel B._|_Kuwait_||||
|1975|.|.|.|6.40|.|5.14|−8.00|4.00|3.00|
|1980|3.69|2.97|1.47|5.18|.|5.13|−10.00|6.00|4.00|
|1985|5.46|1.19|4.65|8.92|7.07|5.49|−8.00|4.00|4.00|
|1990|4.98|3.15|2.17|7.51|7.07|4.99|.|7.00|7.00|
|1995|6.41|4.83|5.91|8.89|7.13|5.29|−7.00|5.00|5.00|
|2000|6.97|6.37|5.99|8.09|7.96|6.46|−7.00|4.00|5.00|
|2005|7.08|6.72|5.81|7.84|7.56|7.47|−7.00|4.00|5.00|
|2010|6.95|6.18|5.65|8.07|7.59|7.24|−7.00|4.00|5.00|
|2015|6.62|6.40|4.99|7.58|6.76|7.39|−7.00|5.00|5.00|

_Source_ : Authors’ tabulation of the Gwartney, Lawson, and Hall (2017) Economic Freedom of the World (EFW) index, Center for Systemic Peace Polity IV Index, and Freedom House Freedom in the World Report (2018). _Note_ : Table presents the EFW Index, its components, the Polity IV Index, and the Freedom House Political Rights and Civil Rights Indexes over 1975–2015 for Jordan in panel a and Kuwait in panel b.

The refugees also boosted the demand side of the economy. Figure S1.1 in the supplementary on- line appendix S1 shows that the largely Transjordanian-owned real-estate sector boomed, housing starts doubled, and construction employment expanded (Troquer and al Oudat 1999; van Hear 1995, 1998; De Bel-Air 2007).

In terms of Jordan’s EFW scores, improvements in Jordanian monetary policy translated into substantial gains in Jordan’s sound money EFW subscore—rising 15.3 percent from 1990 to 1995 and by 35.2 percent from 1995 to 2000. Reforms to tariffs and the removal of trade barriers also saw a rise in Jordan’s trade liberalization subscore by nearly 38 percent over 1990 to 1995, increasing from 4.8 to over 6.6 (table 5).

Acemoglu and Robinson (2008) note that often it is necessary that there be a shock to the distribution of power in order to overcome institutional persistence. Accordingly, these changes are mirrored by significant changes in Jordan’s legal system sub-score within the EFW index, rising from 3.1 in 1990 to 4.63 in 1995—a change of nearly 49 percent. This was a substantial improvement in Jordanian legal institutions, the most rigid economic institution (Acemoglu and Robinson 2008).

Jordan liberalized its economy to settle the Kuwaiti-Palestinians, and they, in turn, were a promarket cohort that tipped the political balance in favor of further free market reforms after being included in the governing coalition (Brynen 1992). The resulting economic boom caused by the refugees and continued by the reforms reduced opposition to liberalization and the risk of policy backtracking as had happened often before.

# **8. Conclusion**

The Kuwaiti-Palestinian refugee surge to Jordan in 1990 and 1991 is a natural experiment that allows us to understand how a government changed its economic policy after experiencing mass
15 immigration. The quality of Jordan’s economic institutions improved significantly after 1990 relative to several combinations of OIC countries—essentially rising from that of a poor Muslim country to that of an OECD country without significant changes in political or civil freedoms. Jordan’s success is especially striking as it has relatively weak economic institutions compared to developed nations that are concerned over comparatively smaller flows of immigrants. In at least one country, massive immigration from the developing world improved economic institutions in a country with weak institutions.

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**Supplementary  Appendix How Mass Immigration Affects Countries with Weak Economic Institutions: A Natural Experiment in Jordan Alex Nowrasteh, Andrew C. Forrester, and Cole Blondin**
<!-- Start of picture text --> a | —— Construction ----> Agriculture<br>—— Wholesale Trade —-—- Manufacturing<br>I<br>I Refugee Surge<br>gx |<br>|<br>I<br>|<br>a2 || y a -Ts~ Noes ei ao<br>aQ I r~<br>o)= | / /<br>te) I 2 -<br>2 aed<br>ae<br>Va<br>\ 7 NL7<br>|<br>°<br>1975 1980 1985 1990 1995 2000 2005 2010 2015<br><!-- End of picture text -->
**Table S1.1.** OIC Countries and Donor Pool  Selection

|**Country**|**Joined**|**EFW data**|**Country**|**Joined**|**EFW data**|
|---|---|---|---|---|---|
|Afghanistan|1969||Malaysia|1969|*|
|Albania|1992||Maldives|1976||
|Algeria|1969||Mali|1969|*|
|Azerbaijan|1992||Mauritania|1969||
|Bahrain|1972||Morocco|1969|*|
|Bangladesh|1974|*|Mozambique|1994||
|Benin|1983||Niger|1969|*|
|Brunei|1984||Nigeria|1986|*|
|Burkina Faso|1974||Oman|1972||
|Cameroon|1974||Pakistan|1969|*|
|Chad|1969||Palestine|1969||
|Comoros|1976||Qatar|1972||
|Côte d’Ivoire|2001||Saudi Arabia|1969||
|Djibouti|1978||Senegal|1969||
|Egypt|1969|*|Sierra Leone|1972|*|
|Gabon|1974||Somalia|1969||
|Gambia|1974||Sudan|1969||
|Guinea|1969||Suriname|1996||
|Guinea-Bissau|1974||Syria|1972|*|
|Guyana|1998||Tajikistan|1992||
|Indonesia|1969|*|Togo|1997||
|Iran|1969|*|Tunisia|1969|*|
|Iraq|1975||Turkey|1969|*|
|Jordan|1969|*|Turkmenistan|1992||
|Kazakhstan|1995||Uganda|1974||
|Kuwait|1969||UAE|1972||
|Kyrgyz Republic|1992||Uzbekistan|1996||
|Lebanon|1969||Yemen|1969||
|Libya|1969|||||

_Source_ : Organisation of Islamic Cooperation (OIC) and Gwartney, Lawson, and Hall (2017) Economic Freedom of the World (EFW) report. _Note_ : Listing of sample OIC countries with complete EFW data prior to 1990. * denote inclusion in the donor pool used to construct Synthetic Jordan.

**Table S1.2.** EFW Index and Components, Summary Statistics

||**Mean**|**Std. dev.**|**Min**|**Max**|**N**|
|---|---|---|---|---|---|
|0. EFW index|5.802|0.910|3.010|7.650|315|
|1. Size of government|6.424|1.332|1.529|9.170|315|
|2. Rule of law|4.035|1.142|1.368|6.393|308|
|3. Sound money|6.947|1.498|0.059|9.679|315|
|4. International trade freedom|5.652|1.668|0.000|7.955|315|
|5. Regulation|5.928|1.123|2.722|8.678|312|

_Source_ : Gwartney, Lawson, and Hall (2017) Economic Freedom of the World (EFW) report. _Note_ : Summary statistics for the Gwartney, Lawson, and Hall (2017) EFW index and its components, 1990–2015.
**Table S1.3.** Effects of the Jordanian Refugee Surge, Polity IV Index

||**OI**<br>|**C all**<br>|**OIC mi**<br>|**nus PAK**<br>|**OIC**<br>|**SAL**<br>|
|---|---|---|---|---|---|---|
||**Effect**<br>**(1)**|**_p_-value**<br>**(2)**|**Effect**<br>**(3)**|**_p_-value**<br>**(4)**|**Effect**<br>**(5)**|**_p_-value**<br>**(6)**|
|1991|3.740|0.545|3.740|0.500|1.930|0.714|
|1992|5.740|0.455|5.740|0.417|3.620|0.714|
|1993|5.110|0.455|5.110|0.417|2.240|0.857|
|1994|5.110|0.455|5.110|0.417|2.240|0.857|
|1995|5.110|0.455|5.110|0.417|2.240|0.857|
|1996|5.110|0.364|5.110|0.500|2.240|0.714|
|1997|5.110|0.545|5.110|0.583|2.240|0.714|
|1998|5.110|0.545|5.110|0.583|1.930|0.571|
|1999|5.110|0.455|5.110|0.333|1.930|0.714|
|2000|3.740|0.545|3.740|0.417|1.930|0.714|
|2001|3.740|0.545|3.740|0.333|1.930|0.714|
|2002|4.055|0.455|4.055|0.333|2.620|0.429|
|2003|4.055|0.455|4.055|0.333|2.620|0.429|
|2004|4.055|0.364|4.055|0.250|2.620|0.429|
|2005|4.055|0.364|4.055|0.250|2.620|0.429|
|2006|4.055|0.364|4.055|0.250|2.620|0.429|
|2007|3.055|0.545|3.055|0.417|1.620|0.571|
|2008|3.055|0.455|3.055|0.417|1.620|0.571|
|2009|3.055|0.545|3.055|0.667|1.620|0.714|
|2010|3.055|0.545|3.055|0.583|1.620|0.571|
|2011|0.535|0.909|0.535|0.917|−4.520|0.429|
|2012|1.590|0.818|1.590|0.917|−5.210|0.429|
|2013|1.275|0.545|1.275|0.750|−5.900|0.286|
|2014|0.960|0.909|0.960|0.750|−6.590|0.286|
|2015|0.960|0.909|0.960|0.750|−6.590|0.286|

_Source_ : Authors’ analysis of the Polity IV index. Additional data come from the Polity IV dataset, Freedom House, the Database of Political Institutions (DPI), and the JuriGlobe database. _Note_ : Estimated treatment effects on Jordan’s Polity IV score and corresponding permutation test _p_ -values that indicate the fraction of estimated treatment effects that are larger than the estimated effect on Jordan’s Polity IV score following the 1990 refugee surge. OIC denotes the full Organisation of Islamic Cooperation donor pool; OIC minus PAK denotes the OIC donor without Pakistan; and OIC SAL denotes the donor pool limited to OIC countries that received Structural Adjustment Loans (SALs) from either the World Bank or International Monetary Fund (IMF).

**Table S1.4.** Goodness of Fit Estimates for Synthetic Jordan, Polity IV Index

||**OIC all**|**OIC minus PAK**|**OIC SAL**|
|---|---|---|---|
|_Pre-treatment fit_||||
|(1) RMSPE|1.382|1.382|1.822|
|_Permutation tests_||||
|(2) Pr(post RMSPE≥Jordan)|0.909|0.833|1.000|
|(3) Pr(pre/post RMSPE≥Jordan)|0.636|0.667|1.000|
|(4) Pr(pre RMSPE≥Jordan)|0.455|0.417|0.000|

_Source_ : Authors’ analysis of the Polity IV index. Additional data come from the Polity IV dataset, Freedom House, the Database of Political Institutions (DPI), and the JuriGlobe database. _Note_ : Table presents goodness of fit metrics for Synthetic Jordan with the Polity IV index as the outcome of interest. Goodness of fit for Synthetic Jordan is denoted by its Root Mean Squared Prediction Error (RMSPE). Placebo tests reassign the 1990 refugee surge to each control country and report the fraction of countries with a post-treatment RSMPE greater than Jordan’s RMPSE, normalized ratio of pre- to post-treatment RMSPE greater than Jordan’s RMSPE, and pre-treatment RMSPE greater than Jordan’s. OIC denotes the full Organisation of Islamic Cooperation donor pool; OIC minus PAK denotes the OIC donor without Pakistan; and OIC SAL denotes the donor pool limited to OIC countries that received Structural Adjustment Loans (SALs) from either the World Bank or International Monetary Fund (IMF).
**Table S1.5.** Predictor Balance for Synthetic Jordan, Polity IV Index

||**Real Jordan**|**Sample means**|**OIC all**|**OIC minus PAK**|**OIC SAL**|
|---|---|---|---|---|---|
|Polity II (1975)|−10.000|2.104|−9.000|−9.000|−9.000|
|Polity II (1985)|−9.000|−1.201|−8.685|−8.685|−8.000|
|Political rights|5.667|4.409|5.646|5.646|5.371|
|Civil liberties|5.600|4.370|6.124|6.124|4.781|
|Exec. constraints|1.467|0.360|1.126|1.126|1.467|
|Presidential|1.000|0.556|1.000|1.000|1.000|
|Parliamentary|0.000|0.271|0.000|0.000|0.000|
|Civil law|1.000|0.757|1.000|1.000|1.000|
|Common law|0.000|0.325|0.000|0.000|0.000|
|Muslim law|1.000|0.222|1.000|1.000|1.000|

_Source_ : Authors’ analysis of the Polity IV index. Additional data come from the Polity IV dataset, Freedom House, the Database of Political Institutions (DPI), and the JuriGlobe database. _Note_ : Table presents pre-treatment predictor variables for Jordan, their corresponding pretreatment sample means, and the weighted averages used to construct Synthetic Jordan. OIC denotes the full Organisation of Islamic Cooperation donor pool; OIC minus PAK denotes the OIC donor without Pakistan; and OIC SAL denotes the donor pool limited to OIC countries that received Structural Adjustment Loans (SALs) from either the World Bank or International Monetary Fund (IMF).

**Table S1.6.** Synthetic Jordan Country Weights, Polity IV Index

||**Weight**|||**Weight**|
|---|---|---|---|---|
|||_Panel A. OIC all_|||
|Mali|0.000||Turkey|0.000|
|Niger|0.000||Egypt|0.000|
|Sierra Leone|0.000||Syria|0.685|
|Nigeria|0.000||Pakistan|0.000|
|Morocco|0.000||Bangladesh|0.000|
|Tunisia|0.315||Malaysia|0.000|
|Iran|0.000||Indonesia|0.000|
|||_Panel B. OIC minus PAK_|||
|Mali|0.000||Turkey|0.000|
|Niger|0.000||Egypt|0.000|
|Sierra Leone|0.000||Syria|0.685|
|Nigeria|0.000||Pakistan|–|
|Morocco|0.000||Bangladesh|0.000|
|Tunisia|0.315||Malaysia|0.000|
|Iran|0.000||Indonesia|0.000|
|||_Panel C. OIC SAL_|||
|Mali|0.000||Turkey|0.000|
|Niger|0.000||Egypt|–|
|Sierra Leone|0.000||Syria|–|
|Nigeria|–||Pakistan|0.000|
|Morocco|0.310||Bangladesh|0.000|
|Tunisia|0.690||Malaysia|–|
|Iran|–||Indonesia|0.000|

_Source_ : Authors’ analysis of the Polity IV index. Additional data come from the Polity IV dataset, Freedom House, the Database of Political Institutions (DPI), and the JuriGlobe database. _Note_ : Estimated country weights to construct Synthetic Jordan based on the Polity IV index as the outcome. OIC denotes the full Organisation of Islamic Cooperation donor pool; OIC minus PAK denotes the OIC donor without Pakistan; and OIC SAL denotes the donor pool limited to OIC countries that received Structural Adjustment Loans (SALs) from either the World Bank or International Monetary Fund (IMF).
1 The World Bank Economic Review

# **Reference**

Gwartney, James, Robert Lawson, and Joshua Hall. 2017. “Economic Freedom of the World: 2017 Annual Report.” Fraser Institute. https://www.fraserinstitute.org/studies/economic-freedom.