Are IMF Lending Programs Harmful for Human Rights?

• In Event: New Perspectives on International Collaboration

Abstract

Is participation in IMF lending programs bad for borrowing countries’ protection of human rights? We lay out several different pathways through which countries that participate in conditional IMF programs might experience deterioration in observed levels of human rights protection for their citizens. Indeed, prior empirical work on the IMF program-human rights link generally finds a negative relationship, but there are at least three good reasons to revisit the question of the effect of participation in IMF programs on human rights respect. First, credibly estimating the impact of IMF programs on human rights requires handling the problem of the non-random assignment of IMF lending arrangements. Second, accurately gauging countries’ levels of physical integrity rights respect has to account for changes in how this indicator has been measured over time. And third, the independent impact of one dimension of IMF program participation (conditionality) on human rights respect cannot be cleanly distinguished from the other features of lending arrangements when scholars rely solely on binary participating/non-participating measures of countries’ involvement with the IMF. In this paper we address all three issues in the effort to generate a more reliable answer to the question posed in the paper’s title. In the first set of tests we use data from 120 low- and middle-income countries between 1972 and 2010 to link IMF program participation to a better measure of physical integrity rights (from Fariss 2014). To handle the selection issue, we use a compound instrumentation approach, recently developed and popularized by Lang (2016), Nelson and Wallace (2017), and Stubbs et al. (forthcoming), to generate our estimates of the conditional difference in the level of government respect for physical integrity rights between IMF participation and non-participation cases. The instrumental variable approach uses a plausibly exogenous factor linked to both participation and to the number of conditions in lending arrangements (the IMF’s annual liquidity constraint) in concert with country-specific averages of the likelihood of program participation and the number of conditions attached to the loans. We find a statistically significant negative relationship on average between participation in IMF lending programs and the human rights measure. We go further in the paper by distinguishing the impacts of IMF program participation from the effects of conditionality, using data capturing the comprehensiveness of conditionality in all IMF lending arrangements between 1985 and 2010.

Authors

• Christopher Dinkel, Northwestern University

• Stephen Craig Nelson, Northwestern University