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

2. The Question
“By bringing in the IMF, governments gain political leverage - via conditionality - to push through unpopular policies. For certain constituencies, these policies dampen the effects of bad economic performance by redistributing income. But IMF programs doubly hurt others who are less well off: They lower growth and exacerbate income inequality.” - Vreeland, 2003
“But IMF programs doubly hurt
others who are less well off: They lower growth and exacerbate income inequality.” - Vreeland, 2003

3. The Question: Continued
Does the regime type of a country matter when considering the effects of an IMF program on income inequality?

4. Hypothesis IMF conditionality under a program
In autocracies, income inequality (in many cases) is already bad
Governments lack incentive for social programs
Everyone is worse off, gap similar
post-program
In democracies, there is more for governments to cut (social programs, health, education, etc.)
Everyone may be worse off, but the inequality gap widened
post-program

5. Hypothesis: An Illustration
Does the observed IMF inequality effect depend on regime type?
* Wider curve indicates more inequality

6. Methodology
Dependent Variable: Standardized Gini coefficient (measure of income inequality)
Independent Variables: Democracy, IMF Program Participation
Using an interaction term between the two for our hypothesis
Time series regressions

7. What We’re Finding... (Very) preliminary support of our hypothesis
Democracy
Autocracy

8. What’s Next Controls and other effects in each regime type
Effects on social spending (education, health)
Other measures of inequality
Relative redistribution of wealth
Endogeneity

9. What’s Next: Continued
Different types of programs
Stand-by Arrangements (SBA)
Common & Conditional
Flexible Credit Line (FCL) & Precautionary and Liquidity Line (PLL)
Generally not conditional
Rapid financing
New programs are beyond our data

10. Questions?
Thank you!