IMF Programs, Democracy, and Income Inequality By Rachel Azafrani and Leo Zucker

Literature: IMF Participation......increases poverty (Handa & King 1997; Oberdabernig 2012)...adversely affects income inequality (Pastor 1987; Garuda 2000; Vreeland 2002, 2003)

●Do the effects of IMF programs depend on regime type? Nooruddin & Simmons (2006): Democracies begin to look more like autocracies under IMF programs Question

Hypothesis H1: The effect of participation in IMF programs on income inequality depends on regime type. H2: As a result of program participation, democracies will experience greater growth (or less reduction) in income inequality than autocracies will.

Two Options: Democracies -Conventional wisdom: more social spending -Mitigate conditionality; less cuts or -When money is scarce, everyone fights for a piece of the pie (Nooruddin & Simmons 2006) -Interest groups win; social spending cuts

Two Options: Autocracies -Conventional wisdom: less social spending -Under conditionality, cut social spending or -Social spending benefits the upper and middle classes -Conditionality decreases income of the upper and middle classes

Methodology ●Dependent Variable: Standardized Gini coefficient ●Independent Variables: Democracy, IMF Program Participation, Different Program Types o Interaction term o Kuznets (1955) determinants of income inequality ●Time series regressions o Fixed-effects o Up to 5 year lag

Descriptive Data

Results Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

Marginal Effects Democracies: insignificant Autocracies: *** reduce income inequality ℘ Holds across all lags up to 3 years

Marginal Effects: Continued

Conclusions ●No significant effect for democracies ●Autocracies reduce income inequality o Lowering income of the upper classes o Same effect and significance in Extended Structural Adjustment Facilities (ESAFs): robust

Questions Thank you!