IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp18350.html

The 'Despotic Leviathan' and Its Financial Architecture: How IMF Conditionalities Deepen Inequality

Author

Listed:
  • Mehrotra, Santosh

    (Higher School of Economics (HSE))

  • Hassan, Shady

Abstract

This paper examines how IMF policies contribute to the inequality in MENA, and to a Middle-Income Trap (MIT). Developing a theory expanding Acemoglu and Robinson’s “Narrow Corridor” framework, it shows how IMF conditions align domestic elite incentives with creditor interests through a principal-agent lens. Using 2020-2025 data, its analysis reveals IMF monetary policies create rent-seeking structures that institutionalize inequality and suppress growth. The paper identifies an “engineered r>g dynamic” as a quantifiable signature of this extraction, empirically verified in Egypt. It establishes a causal link between financial/monetary policy (interest rates, debt compounding) and the “Despotic Leviathan” state formation.

Suggested Citation

  • Mehrotra, Santosh & Hassan, Shady, 2025. "The 'Despotic Leviathan' and Its Financial Architecture: How IMF Conditionalities Deepen Inequality," IZA Discussion Papers 18350, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18350
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp18350.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Birdsall, Nancy & de la Torre, Augusto & Caicedo, Felipe Valencia, 2010. "The Washington consensus : assessing a damaged brand," Policy Research Working Paper Series 5316, The World Bank.
    2. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rachel M. Gisselquist, 2015. "State capability and prospects for close co-ordination: Considerations for industrial policy in Africa," WIDER Working Paper Series 035, World Institute for Development Economic Research (UNU-WIDER).
    2. Mohammad Zulfan Tadjoeddin, 2012. "Electoral conflict and the maturity of local democracy in Indonesia: testing the modernisation hypothesis," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 17(3), pages 476-497.
    3. Leopoldo Fergusson & Carlos Molina, 2020. "Facebook Causes Protests," HiCN Working Papers 323, Households in Conflict Network.
    4. Gustavo J. Bobonis & Paul J. Gertler & Marco Gonzalez-Navarro & Simeon Nichter, 2022. "Vulnerability and Clientelism," American Economic Review, American Economic Association, vol. 112(11), pages 3627-3659, November.
    5. Ouedraogo, Benoît & Ouedraogo, Idrissa & Sawadogo, Hamidou, 2025. "Effects of trade openness on income inequality in sub-Saharan Africa: direct effects and transmission channels," International Economics, Elsevier, vol. 184(C).
    6. Iyigun, Murat, 2006. "Ottoman Conquests and European Ecclesiastical Pluralism," IZA Discussion Papers 1973, IZA Network @ LISER.
    7. Seghezza, Elena & Pittaluga, Giovanni B., 2018. "Resource rents and populism in resource-dependent economies," European Journal of Political Economy, Elsevier, vol. 54(C), pages 83-88.
    8. Daron Acemoglu & James A. Robinson, 2013. "Ekonomia kontra polityka: niebezpieczne rady w kwestiach polityki ekonomicznej," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 11-12, pages 113-136.
    9. Lourdes ROJAS RUBIO, 2022. "Inequality, Corruption and Support for Democracy," Thema Working Papers 2022-20, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.
    10. Gary Goertz & Tony Hak & Jan Dul, 2013. "Ceilings and Floors," Sociological Methods & Research, , vol. 42(1), pages 3-40, February.
    11. Abeliansky, Ana & Krenz, Astrid, 2015. "Democracy and international trade: Differential effects from a panel quantile regression framework," University of Göttingen Working Papers in Economics 243, University of Goettingen, Department of Economics.
    12. Marina Dodlova & Anna Gioblas, 2017. "Regime type, inequality, and redistributive transfers in developing countries," WIDER Working Paper Series wp-2017-30, World Institute for Development Economic Research (UNU-WIDER).
    13. Vladimir Popov, 2009. "Why the West Became Rich before China and Why China Has Been Catching Up with the West since 1949: nother Explanation of the “Great Divergence” and “Great Convergence” Stories," Working Papers w0132, New Economic School (NES).
    14. Slesman, Ly & Baharumshah, Ahmad Zubaidi & Azman-Saini, W.N.W., 2019. "Political institutions and finance-growth nexus in emerging markets and developing countries: A tale of one threshold," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 80-100.
    15. Skoufias, Emmanuel & Narayan, Ambar & Dasgupta, Basab & Kaiser, Kai, 2011. "Electoral accountability, fiscal decentralization and service delivery in Indonesia," Policy Research Working Paper Series 5614, The World Bank.
    16. Torsten Persson & Guido Tabellini, 2009. "Democratic Capital: The Nexus of Political and Economic Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 88-126, July.
    17. Dorsch, Michael T. & Maarek, Paul, 2020. "Economic downturns, inequality, and democratic improvements," European Journal of Political Economy, Elsevier, vol. 62(C).
    18. Rabah Arezki & Markus Brückner, 2011. "Food Prices and Political Instability," CESifo Working Paper Series 3544, CESifo.
    19. Van Bon NGUYEN, 2023. "From Fiscal policy to Income inequality in Advanced economies Does Institutional quality matter," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 165-184, March.
    20. Andrea Asoni, 2008. "Protection Of Property Rights And Growth As Political Equilibria," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 953-987, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp18350. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark Fallak (email available below). General contact details of provider: https://edirc.repec.org/data/izaaalu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.