A Model of IFI Conditionality, Program Ownership, and De Facto Implementation

• In Event: New Research on IMF Programs: Design, Implementation, and Impact

Abstract

The shifting emphasis on performance evaluation and accountability in the context of external conditionality programs has brought to the fore the question of local ownership of reforms. While the concept of ownership has featured highly in recent academic and policy debates over the effects of IFI conditionality, it still remains elusive, ill-identified, and under-specified. In this paper, first, we define ownership over the content and timing of actual reforms with respect to the counterfactual level of de jure liberalization that would be achieved in the absence of IFI conditionality, and then we seek to fully identify the indirect relationship between program design, ownership, and policy implementation. To do so, we propose an informational mechanism of IFI conditionality drawing on Benabou and Tirole's (2003) formalization of intrinsic and extrinsic motivation, and accordingly apply tools from contract and principal-agent theory to derive the relationship between IFI conditionality, program ownership, and de facto implementation of reforms, Finally, we use the synthetic control method (SCM) -based measure of continuous levels of ownership (Konstantinidis and Reinsberg 2021) across a sample of IMF arrangements (1980-2014) to probe the validity of our results with respect to the known determinants and effects of ownership.

Authors

• Nikitas Konstantinidis, IE University

• Bernhard Reinsberg, University of Cambridge