Economic Liberalization via IMF Structural Adjustment: Sowing the Seeds of Civil War?

Abstract

AbstractPrevious studies that have explored the effects of economic liberalization on civil war have employed aggregate measures of openness and have failed to account for potential endogeneity bias. In this research note, we suggest two improvements to the study of the relationship between liberalization and civil war. First, emphasizing that it is processes that systematically create new economic winners and losers rather than particular levels of economic openness that have the potential to generate conflict, we consider the effects of one oft-used means of liberalizing economies: the adoption by countries of International Monetary Fund (IMF) structural adjustment programs. Second, we use a bivariate probit model to address issues of endogeneity bias. Analyzing all data available for the period between 1970 and 1999, we identify an association between the adoption of IMF programs and the onset of civil war. This finding suggests that IMF programs to promote economic openness unintentionally may be creating an environment conducive to domestic conflict.