IMF is disastrous for inequality reduction

Following this, we re-run analyses on our original set of controls but using the same four variations of our selection equations described in robustness checks for inequality (Table A8). Results are substantively unchanged. Lastly, findings are robust to the inclusion of IMF fiscal adjustment outliers for all poverty headcount measures from GCIP, but not for headcount and gap measures from the World Bank (Table A9).

Discussion and Conclusions This article incorporated new data on the intensity of fiscal adjustment to examine the effects of IMF austerity on poverty and inequality. In so doing, we overcame limitations of earlier studies that treat the extent of fiscal consolidation required from programs as homogenous. We used a dataset of up to 79 countries observed in the period 2002 to 2018 and deployed an appropriate econometric strategy to find that greater austerity leads to greater income inequality and higher poverty. Probing this relationship further, we found that the effect on inequality is exerted for up to two years, and is driven by concentrating income into the top ten percent of earners. For poverty, the effect is apparent across multiple poverty headcount measures—on the World Bank’s $1.44 and GCIP’s $1.86, $1.90, and $2.50 measures—and one of our two poverty gap measures—at $3.20. Confidence in our findings was bolstered by the fact that our results were consistent across a range of different models estimated in robustness checks. These findings call into question the flattering results of the IMF’s own studies on the impact of its programs on vulnerable populations (Gupta et al., 2020).