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The effect of International Monetary Fund and World Bank programs on poverty

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  • Easterly, William

Abstract

Structural adjustment - as measured by the number of adjustment loans from the IMF, and the World Bank - reduces the growth elasticity of poverty reduction. The author finds no evidence for structural adjustment having a direct effect on growth. The poor benefit less from output expansion in countries with many adjustment loans, than they do in countries with few such loans. By the same token, the poor suffer less from an output contraction in countries with many adjustment loans, than in countries with few. Why would this be? One hypothesis is that adjustment lending is counter-cyclical, in ways that smooth consumption for the poor. There is evidence that some policy variables under adjustment lending are counter-cyclical, but no evidence that the cyclical component of those policy variables affects poverty. The author speculates that the poor may be ill placed to take advantage of new opportunities, created by structural adjustment reforms, just as they may suffer less from the loss of old opportunities in sectors that were artificially protected before reform. Poverty's lower sensitivity to growth under adjustment lending, is bad news when an economy expands, and good news when it contracts. These results could be interpreted as giving support to either the critics, or the supporters of structural adjustment programs.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2517.

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Date of creation: 31 Jan 2001
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Handle: RePEc:wbk:wbrwps:2517

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Keywords: Achieving Shared Growth; Country Strategy&Performance; Economic Conditions and Volatility; Services&Transfers to Poor; Safety Nets and Transfers;

References

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  1. Przeworski, Adam & Vreeland, James Raymond, 2000. "The effect of IMF programs on economic growth," Journal of Development Economics, Elsevier, Elsevier, vol. 62(2), pages 385-421, August.
  2. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, Elsevier, vol. 29(11), pages 1803-1815, November.
  3. Ravallion, Martin, 1997. "Can high-inequality developing countries escape absolute poverty?," Policy Research Working Paper Series 1775, The World Bank.
  4. Easterly, William & Fischer, Stanley, 2001. "Inflation and the Poor," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 33(2), pages 160-78, May.
  5. Lipton, Michael & Ravallion, Martin, 1995. "Poverty and policy," Handbook of Development Economics, Elsevier, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 41, pages 2551-2657 Elsevier.
  6. Bruno, Michael & Ravallion, Martin & Squire, Lyn, 1996. "Equity and growth in developing countries : old and new perspectives on the policy issues," Policy Research Working Paper Series 1563, The World Bank.
  7. Ratna Sahay & Deepak Mishra & Poonam Gupta, 2003. "Output Response to Currency Crises," IMF Working Papers, International Monetary Fund 03/230, International Monetary Fund.
  8. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  9. Rauch, James E., 1997. "Balanced and unbalanced growth," Journal of Development Economics, Elsevier, Elsevier, vol. 53(1), pages 41-66, June.
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Citations

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Cited by:
  1. Brett Inder, 2004. "Economic growth and contraction and their impact on the poor," Monash Econometrics and Business Statistics Working Papers, Monash University, Department of Econometrics and Business Statistics 3/04, Monash University, Department of Econometrics and Business Statistics.
  2. Doris A. Oberdabernig, 2012. "Revisiting the Effects of IMF Programs on Poverty and Inequality," Department of Economics Working Papers wuwp144, Vienna University of Economics, Department of Economics.
  3. Rose, Andrew K, 2002. "Do WTO Members have More Liberal Trade Policy?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3659, C.E.P.R. Discussion Papers.
  4. Meschi, Elena & Vivarelli, Marco, 2009. "Trade and Income Inequality in Developing Countries," World Development, Elsevier, Elsevier, vol. 37(2), pages 287-302, February.

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