Pre or Post Conditionality: Defections, Punishment & Conditionality Timing

• In Event: IOs and Support for International Governance

Abstract

As conditionality is more widely used in transactions between international actors - EU membership conditions, IMF and World Bank conditionality, - understanding how conditionality is designed is paramount, especially because how conditionality is designed shapes political, social, and economic effects of conditionality. An unexplored, yet interesting and important variation in the design of conditionality is its timing: the EU for instance, puts membership conditions up front, while the IMF uses both ex ante and ex post conditionality. In comparison, bilateral aid donors often put only ex post conditions. What explains this variation? I propose that the existence of a punishment mechanism allows international organizations and bilateral donors to utilize ex post conditionality. When such mechanism is unavailable or unrealistic, only ex ante conditionality is used. I compare the IMF and the EU and argue that the reason why the IMF could use ex post conditionality is because of the existence of a punishment mechanism in the form of loan cancellation; the EU, on the other hand, cannot use ex post conditionality and only rely on ex ante membership conditions because few punishment mechanisms exist at its disposal once countries become members. I further extend the theoretical logic to explore the within variation of IMF conditionality. I theorize that the timing of conditionality when a punishment mechanism is present hinged on the expected probability of voluntary vs. that of involuntary defection (non-implementation of conditionality) in conditionality implementation: when the expected probability of involuntary defection is high, ex ante conditions are more likely; when the expected probability of involuntary defection is low, ex post conditions are more likely. Involuntary defections are likely to occur when implementation of IMF conditionality is expected to be politically contested. In the case of involuntary defections, the IMF finds it more difficult to punish a program-participating government. When the possibility of involuntary defections is low with few expected domestic opposition to conditionality, defection only happens when a program-participating government “voluntarily” decides not to implement conditionality, thus the IMF is freer to punish the government. I test the argument within the IMF context using various existing IMF conditionality dataset. The empirical analysis provides strong and consistent evidence to support the theoretical argument.

Author

• Byungwon Woo, Yonsei University