IMF = I’M Fired! IMF Program Participation, Political Systems, and Workers’ Rights

Abstract

How do International Monetary Fund programs and conditions affect labor rights? Recognizing the diversity of International Monetary Fund conditionality, we argue that the more stringent International Monetary Fund labor market conditionality is, the worse labor rights become. However, this negative effect can be mitigated if there exist domestic political institutions that have incentives and abilities to provide protections over workers: one such case is a closed-list proportional representation system; another case is a leftist government that relies on political supports of workers. Our empirical analysis demonstrates that the more labor conditionality a program includes, the worse labor rights the country sustains. In addition, we report that the negative effect is partially mitigated when domestic political circumstances are favorable to the political representation of workers under a proportional representation system or under a leftist government.