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

2020 ◽  
Author(s):  
Valentin Lang
Keyword(s):  
Social Spending ◽  
Difference In Differences ◽  
Absolute Income ◽  
Income Data ◽  
Imf Programs ◽  
The Rich ◽  
Government Responsiveness ◽  
Heterogeneous Effect ◽  
Spending Cuts ◽  
The International Monetary Fund

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.

The effects of debt restructurings on income inequality in the developing world

2021 ◽  
pp. 135406612110014
Author(s):  
Glen Biglaiser ◽  
Ronald J. McGauvran
Keyword(s):  
Developing Countries ◽  
Panel Data ◽  
Income Inequality ◽  
Income Distribution ◽  
Government Spending ◽  
Tax Reform ◽  
Social Spending ◽  
The Poor ◽  
The Rich ◽  
The Impact

Developing countries, saddled with debts, often prefer investors absorb losses through debt restructurings. By not making full repayments, debtor governments could increase social spending, serving poorer constituents, and, in turn, lowering income inequality. Alternatively, debtor governments could reduce taxes and cut government spending, bolstering the assets of the rich at the expense of the poor. Using panel data for 71 developing countries from 1986 to 2016, we assess the effects of debt restructurings on societal income distribution. Specifically, we study the impact of debt restructurings on social spending, tax reform, and income inequality. We find that countries receiving debt restructurings tend to use their newly acquired economic flexibility to reduce taxes and lower social spending, worsening income inequality. The results are also robust to different model specifications. Our study contributes to the globalization and the poor debate, suggesting the economic harm caused to the less well-off following debt restructurings.

From One Crisis to the Next

2017 ◽  
Author(s):  
Stephen C. Nelson
Keyword(s):  
Decision Making ◽  
International Monetary Fund ◽  
Economic Collapse ◽  
Imf Programs ◽  
The International Monetary Fund

This chapter examines Argentina's relationship with the International Monetary Fund (IMF) during the period 1985–2002. It first considers the new policy team formed by Argentine President Raúl Alfonsín and its plan to solve the country's spiraling inflation problem before discussing the successive failed stabilization programs, including Plan Austral and Plan BB, that culminated in Alfonsín's resignation and the transformation of the Argentine economy under a group of neoliberals in the Peronist government of Carlos Menem. It also analyzes the politics surrounding the series of IMF programs that preceded the economic collapse of 2001–2002, along with the United States's influence on the decision making of the Fund. Finally, it assesses the aftermath of the Argentine crisis.

Welfare Efforts in Comparative Perspective

2020 ◽  
pp. 52-89
Author(s):  
Ferdinand Eibl
Keyword(s):  
Social Policy ◽  
Social Protection ◽  
Social Spending ◽  
Welfare Provision ◽  
Regime Formation ◽  
Policy Regimes ◽  
The Social ◽  
Social Expenditures ◽  
The International Monetary Fund

This chapter provides an analytical overview of welfare provision in labour· abundant MENA regimes. Organized in sections by country and covering the period from regime formation until the late 2000s, the chapter pays particular attention to spending levels and the accessibility of social policies, and maps the eigbt regimes onto the three different pathways of welfare provision outlined in Chapter I. It draws on a combination of historical reports and statistics, available secondary accounts, and a novel dataset on social expenditures developed from archival material of the International Monetary Fund (IMF). It also diversifies the picture by examining policies of education, health, and social protection separately. The chapter lays important groundwork for further analyses and gives a more complete sense of social policy regimes beyond the social spending figures presented in Chapter I.

scholarly journals Inequality and Fiscal Redistribution in Middle Income Countries: Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa

2016 ◽  
Vol 7 (1) ◽  
Author(s):  
Nora Lustig
Keyword(s):  
South Africa ◽  
Fiscal Policy ◽  
Health Spending ◽  
Social Spending ◽  
Income Poverty ◽  
Middle Income ◽  
Middle Income Countries ◽  
The Rich ◽  
Incidence Analysis ◽  
Consumption Taxes

AbstractThis paper examines the redistributive impact of fiscal policy for Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa using comparable fiscal incidence analysis with data from around 2010. The largest redistributive effect is in South Africa and the smallest in Indonesia. Success in fiscal redistribution is driven primarily by redistributive effort (share of social spending to GDP in each country) and the extent to which transfers/subsidies are targeted to the poor and direct taxes targeted to the rich. While fiscal policy always reduces inequality, this is not the case with poverty. When pensions are not considered a transfer, fiscal policy increases poverty in Brazil (over and above market income poverty) due to high consumption taxes on basic goods. Total spending on education is pro-poor except for Indonesia, where it is neutral in absolute terms. Health spending is pro-poor in Brazil, Chile and South Africa, roughly neutral in absolute terms in Mexico, and not pro-poor in Indonesia and Peru.

scholarly journals The International Monetary Fund’s intervention in education systems and its impact on children’s chances of completing school

2021 ◽  
Author(s):  
Adel Daoud
Keyword(s):  
Effective Means ◽  
Education Sector ◽  
Education Policies ◽  
Middle Income ◽  
Education Outcomes ◽  
Middle Income Countries ◽  
Imf Programs ◽  
Policy Content ◽  
Effect Heterogeneity ◽  
The International Monetary Fund

Enabling children to acquire an education is one of the most effective means to reduce inequality, poverty, and ill-health globally. While in normal times a government controls its educational policies, during times of macroeconomic instability, that control may shift to supporting international organizations, such as the International Monetary Fund (IMF). While much research has focused on which sectors has been affected by IMF policies, scholars have devoted little attention to the policy content of IMF interventions affecting the education sector and children’s education outcomes: denoted IMF-education policies. This article evaluates the extent which IMF-education policies exist in all programs and how these policies and IMF programs affect children’s likelihood of completing schools. While IMF-education policies have a small adverse effect yet statistically insignificant on children’s probability of completing school, these policies moderate effect heterogeneity for IMF programs. The effect of IMF programs (joint set of policies) adversely effect children’s chances of completing school by six percentage points. By analyzing how IMF-education policies but also how IMF programs affect the education sector in low- and middle-income countries, scholars will gain a deeper understanding of how such policies will likely affect downstream outcomes.

scholarly journals Austerity Beyond Crisis: Economists and the Institution of Austere Social Spending for At-Risk Children in Israel

2020 ◽  
Vol 50 (1) ◽  
pp. 168-187
Author(s):  
ASA MARON
Keyword(s):  
Social Policy ◽  
Policy Design ◽  
Policy Instrument ◽  
Social Spending ◽  
Popular Resistance ◽  
Child Welfare Policy ◽  
At Risk Children ◽  
Original Contribution ◽  
Spending Cuts

AbstractAusterity is frequently associated with crisis-enabled spending cuts. What happens when the crisis is over? This article’s original contribution lies in its in-depth exploration of one mechanism that help explain austerity’s endurance post-crisis, when state elites face increased popular resistance and pressure to reinstate social spending. This mechanism calls attention to the role of economists in Central Budgeting Offices as agents of technocratization and de-politicization within social policy domains. These economists may institute an austere spending mode by changing social spending’s norms and instruments. To demonstrate economists’ role in mediating macroeconomic fiscal goals and social policy design over time, the article examines the development of child welfare policy in Israel before, during and in the aftermath of economic crisis. In this case, austerity attained hegemony when economists were able to delegitimize and shelve an ‘irresponsible’ social spending proposal – and in response to post-crisis demands for compensation – introduce an austere policy instrument to cap social spending during a period of social policy expansion. This analysis suggests that scholars regard relations between austerity and social spending as dialectical.

Poverty, Inequality, and the International Monetary Fund: How Austerity Hurts the Poor and Widens Inequality

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Thomas Stubbs ◽  
Alexander Kentikelenis ◽  
Rebecca Ray ◽  
Kevin P. Gallagher
Keyword(s):  
International Monetary Fund ◽  
Developing World ◽  
International Level ◽  
Policy Reforms ◽  
The Poor ◽  
Original Dataset ◽  
Socio Economic Development ◽  
Imf Programs ◽  
The International Monetary Fund ◽  
The Imf

Abstract Among the drivers of socio-economic development, this article focuses on an important yet insufficiently understood international-level determinant: the spread of austerity policies to the developing world by the International Monetary Fund (IMF). In offering loans to developing countries in exchange for policy reforms, the IMF typically sets the fiscal parameters within which development occurs. Using an original dataset of IMF-mandated austerity targets, we examine how policy reforms prescribed in IMF programs affect inequality and poverty. Our empirical analyses span a panel of up to 79 countries for the period 2002–2018. Using instrumentation techniques, we control for the possibility that these relationships are driven by the IMF imposing harsher austerity measures precisely in countries with more problematic economies. Our findings show that stricter austerity is associated with greater income inequality for up to two years, and that this effect is driven by concentrating income to the top 10% of earners while all other deciles lose out. We also find that stricter austerity is associated with higher poverty headcounts and poverty gaps. Taken together, our findings suggest that the IMF neglects the multiple ways its own policy advice contributed to social inequity in the developing world.

‘Oh, what a tangled web we weave’: How tax linkages shape responsiveness in the United Kingdom and France

2018 ◽  
Vol 26 (3) ◽  
pp. 280-290
Author(s):  
Zbigniew Truchlewski
Keyword(s):  
United Kingdom ◽  
The United Kingdom ◽  
Fiscal Austerity ◽  
The Uk ◽  
The Right ◽  
Government Responsiveness ◽  
Partisan Competition ◽  
Spending Cuts

What determines government responsiveness during fiscal austerity? Comparing the United Kingdom (UK) and France between 1975 and 2015 and using narrative accounts of austerity episodes, I argue that tax linkages (defined as the nature of dominant taxes, their governance and their dilemmas) shape partisan competition and fiscal responsiveness. I show how, despite comparable conditions, the UK and France implemented austerity simultaneously but opted for divergent types of fiscal responsiveness. In the UK, the right has been advantaged by centralized and weak tax linkages, which acted as a break on tax hikes and favoured spending cuts. In France, the left benefited from decentralized and strong tax linkages, which helped to increase taxes and made it hard to cut spending.

scholarly journals Government Responsiveness under Majoritarian and (within) Proportional Electoral Systems

2018 ◽  
Vol 55 (4) ◽  
pp. 595-616 ◽  
Author(s):  
Benjamin Ferland
Keyword(s):  
Electoral Systems ◽  
Representative Democracy ◽  
Empirical Literature ◽  
Social Spending ◽  
Dynamic Changes ◽  
Veto Player ◽  
Ideological Congruence ◽  
Government Responsiveness ◽  
Number Of Parties ◽  
Advanced Democracies

AbstractGovernment responsiveness to citizens’ preferences is considered a sign of a well-functioning representative democracy. While the empirical literature has grown significantly, scholars have given less scrutiny to the conceptualization of government responsiveness and its relationship to policy/ideological congruence. We show that government responsiveness represents dynamic changes from governments in order to improve policy/ideological congruence. In addition, we consider how electoral systems influence governments’ incentives to be responsive as well as their capacity to be responsive. Building on a veto player approach, we argue that government responsiveness decreases as the number of parties in cabinet increases. We examine government responsiveness to citizens’ ideological preferences in 16 advanced democracies in 1980–2016 with respect to social spending. In line with our veto player framework, we show, first, that governments are generally more responsive under majoritarian than PR electoral systems and, second, that government responsiveness decreases under PR electoral systems as the number of parties increases in cabinet.

scholarly journals The Structure of Inequality and the Politics of Redistribution

2011 ◽  
Vol 105 (2) ◽  
pp. 316-336 ◽  
Author(s):  
NOAM LUPU ◽  
JONAS PONTUSSON
Keyword(s):  
Low Income ◽  
Lower Half ◽  
Social Spending ◽  
Present Survey ◽  
Middle Income ◽  
Redistributive Policies ◽  
Preferences For Redistribution ◽  
The Poor ◽  
The Rich ◽  
Advanced Capitalist

Against the current consensus among comparative political economists, we argue that inequality matters for redistributive politics in advanced capitalist societies, but it is the structure of inequality, not the level of inequality, that matters. Our theory posits that middle-income voters will be inclined to ally with low-income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich. We test this proposition with data from 15 to 18 advanced democracies and find that both redistribution and nonelderly social spending increase as the dispersion of earnings in the upper half of the distribution increases relative to the dispersion of earnings in the lower half of the distribution. In addition, we present survey evidence on preferences for redistribution among middle-income voters that is consistent with our theory and regression results indicating that left parties are more likely to participate in government when the structure of inequality is characterized by skew.

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