INTERNATIONAL MONETARY FUND STABILIZATION PROGRAMS AND INCOME DISTRIBUTION: COSTA RICA AND JAMAICA

This study analyzes the impact of orthodox stabilization policies on income distribution in two small, open economies--Costa Rica and Jamaica. International Monetary Fund-supported stabilization programs have been criticized on the grounds that they ignored long-term development objectives, especially economic growth issues, while emphasizing short-term stabilization and balance of payments objectives. Critics of the Fund have concentrated for the most part on the short-run recessionary impacts of Fund programs. On the other hand, Fund cross-country studies show mixed impacts on economic growth and success in realizing current account and balance of payments improvements. This dissertation critiques the orthodox theory of stabilization--the 'monetary approach to the balance of payments'--and argues that the structuralist growth critique of the Fund is theoretically misplaced. Noting the gap in the theoretical and empirical literature with respect to the treatment of income distribution in the context of stabilization, the study investigates the distributive impact of Fund stabilization policies, i.e. fiscal, exchange rate, and wage policies, on the Costa Rican (1980-83) and Jamaican (1981-85) economies. The central method of inquiry is statistical analysis of official government data, supplemented by the non-standardized interviewing technique. The major findings are that: (1) in contrast to the Fund's goals, both countries experienced a sharp acceleration of inflation after Fund-imposed devaluations, while the balance of payments was brought into equilibrium; (2) consistent with the equity-oriented critique, there were declines in real wages, in the 'social wage', and in the wage share of national income, and a concentration of income during the stabilization period; and (3) there was evidence that poverty increased, and that orthodox policies tended to redistribute real income to agro-exporters at the expense of urban workers and small farmers who produced food for the domestic market. While the study focuses on the distribution of income during Fund programs, a secondary concern is the analysis of IMF influence on domestic policy making in Costa Rica and Jamaica and the Fund's interest in reorienting their development toward greater economic integration with the world market.