The economics of the democratic deficit: The effect of IMF programs on inequality-Reference-Cited by-同舟云学术

The economics of the democratic deficit: The effect of IMF programs on inequality

Published:2020-12-02 Issue:3 Volume:16 Page:599-623
ISSN:1559-7431
Container-title:The Review of International Organizations
language:en
Short-container-title:Rev Int Organ

Author:

Lang Valentin^ORCID

Abstract

AbstractDoes the International Monetary Fund (IMF) increase inequality? To answer this question, this article introduces a new empirical strategy for determining the effects of IMF programs that exploits the heterogeneous effect of IMF liquidity on loan allocation based on a difference-in-differences logic. The results show that IMF programs increase income inequality. An analysis of decile-specific income data shows that this effect is driven by absolute income losses for the poor and not by income gains for the rich. The effect persists for up to 5 years, and is stronger for IMF programs in democracies, and when policy conditions, particularly those that demand social-spending cuts and labor-market reforms, are more extensive. These results suggest that IMF programs can constrain government responsiveness to domestic distributional preferences.

Funder

Universität Mannheim

Publisher

Springer Science and Business Media LLC

Subject

Economics and Econometrics,Political Science and International Relations

Link

https://link.springer.com/content/pdf/10.1007/s11558-020-09405-x.pdf

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