Structural adjustment, state capacity and child health: evidence from IMF programmes

Area of Science:

• Public Health
• Health Economics
• International Finance

Background:

• Growing consensus links International Monetary Fund (IMF) policy reforms to adverse public health effects.
• Uncertainty exists regarding specific IMF policies driving these negative health outcomes.
• This study investigates the impact of fiscal policy, public-sector employment, privatization, and price liberalization on health indicators.

Purpose of the Study:

• To examine the impact of specific IMF policy conditions on public health outcomes.
• To analyze the effects on public health expenditure, child vaccination rates, and child mortality.
• To address endogeneity issues in IMF effectiveness research.

Main Methods:

• Time-series cross-section analyses of up to 128 developing countries (1980-2014).
• Instrumental variables in a seemingly unrelated regression framework to address self-selection and policy condition endogeneity.
• Utilized fixed effects for countries and years as traditional remedies.

Main Results:

• IMF policy conditions on public-sector employment are negatively associated with child health.
• Increased public-sector employment conditions correlate with a significant decrease in child vaccination rates (10.97%).
• IMF programs show a positive association with increased government expenditure on public health (0.91 percentage points).

Conclusions:

• IMF policies, especially those involving public-sector reforms, can undermine public health by weakening state capacity for vaccination delivery.
• International financial institutions must enhance awareness of the public health implications of their policy prescriptions.
• Strengthening state capacity during economic crises is crucial for ensuring quality healthcare delivery alongside increased health spending.