The health effects of IMF - supported programs: A cross-country analysis.

INTERNATIONAL Monetary Fund 069275188

In this paper we provide new insights regarding the impact of IMF programs on health using a world sample over the 1975 - 2014 period. IMF provides loans to financially ailing countries, but with strict conditions, typically involving a mix of privatization, liberalization, and fiscal austerity programs. On the one hand, proponents of IMF support that these programs induce structural adjustment policies which improve the allocation of funds into socially desirable projects such as health care. On the other hand, critics of the IMF argue that loan conditions often translate into reductions in social spending and weakened health care systems. In the context of our study, a problem arises because some of the forces that determine participation in IMF programs are also related to our outcome variable. In other words, IMF program participation is endogenous and depends on both observable and unobservable factors. While we account for the former through the inclusion of macroeconomic controls, unobservable factors, such as political willingness to implement reforms, constitute an empirical challenge. To deal with this issue, we employ Heckman's (1979) two-stage selection model. In this approach, we first employ a probit regression to predict participation in IMF programs and compute the so-called inverse-Mills ratio, and then add this term to the vector of controls in the health participation effects equation. The preliminary results indicate that IMF programs are highly correlated with changes in health as proxied by life expectancy, fertility rate and mortality rate. [ABSTRACT FROM AUTHOR]

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