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This study investigates the distributional effects of international organizations within their member countries. It addresses the issue empirically by examining the causal effect of International Monetary Fund (IMF) programs on income inequality. Introducing a new instrumental variable for IMF programs, I exploit time variation in the IMF's liquidity and cross-sectional variation in a country's probability of having a lending arrangement with the IMF. Using panel data for 155 countries over the 1973–2013 period, the results show that IMF programs substantially increase income inequality in democracies, while having no such effect in non-democracies. The size of this effect on democracies is smaller the more democratized the IMF's decision-making processes are. These results are consistent with the theory that powerful, 'democratically deficient' international organizations that interfere in domestic politics are capable of restricting the responsiveness of democratic governments to the preferences of their citizens.

AbstractDoes the International Monetary Fund (IMF) increase inequality? To answer this question, this article introduces a new empirical strategy for determining the effects of IMF programs that exploits the heterogeneous effect of IMF liquidity on loan allocation based on a difference-in-differences logic. The results show that IMF programs increase income inequality. An analysis of decile-specific income data shows that this effect is driven by absolute income losses for the poor and not by income gains for the rich. The effect persists for up to 5 years, and is stronger for IMF programs in democracies, and when policy conditions, particularly those that demand social-spending cuts and labor-market reforms, are more extensive. These results suggest that IMF programs can constrain government responsiveness to domestic distributional preferences.

This study investigates the distributional effects of international organizations within their member countries. It addresses the issue empirically by examining the causal effect of International Monetary Fund (IMF) programs on income inequality. Introducing a new instrumental variable for IMF programs, I exploit time variation in the IMF's liquidity and cross-sectional variation in a country's probability of having a lending arrangement with the IMF. Using panel data for 155 countries over the 1973–2013 period, the results show that IMF programs substantially increase income inequality in democracies, while having no such effect in non-democracies. The size of this effect on democracies is smaller the more democratized the IMF's decision-making processes are. These results are consistent with the theory that powerful, 'democratically deficient' international organizations that interfere in domestic politics are capable of restricting the responsiveness of democratic governments to the preferences of their citizens.

This study investigates the distributional effects of international organizations within their member countries. It addresses the issue empirically by examining the causal effect of International Monetary Fund (IMF) programs on income inequality. Introducing a new instrumental variable for IMF programs, I exploit time variation in the IMF's liquidity and cross-sectional variation in a country's probability of having a lending arrangement with the IMF. Using panel data for 155 countries over the 1973–2013 period, the results show that IMF programs substantially increase income inequality in democracies, while having no such effect in non-democracies. The size of this effect on democracies is smaller the more democratized the IMF's decision-making processes are. These results are consistent with the theory that powerful, 'democratically deficient' international organizations that interfere in domestic politics are capable of restricting the responsiveness of democratic governments to the preferences of their citizens.

This dissertation consists of four essays on the decision-making and the effects of international organizations. Its empirical focus is on the International Monetary Fund (IMF). The dissertation shows that political interests influence the IMF's decision-making and that IMF programs have important economic effects on sovereign creditworthiness and income inequality. Chapter 1: Buying Votes and International Organizations: The Dirty-Work Hypothesis; Chapter 2: Room for Discretion: Biased Decision-Making in International Financial Institutions; Chapter 3: Stigma or Cushion? IMF Programs and Sovereign Creditworthiness; Chapter 4: The Economics of the Democratic Deficit: The Effect of IMF Programs on Inequality