International negotiations and domestic politics: the case of IMF labor market conditionality

What is the role of international organizations (IOs) in the formulation of domestic policy, and how much influence do citizens have in countries’ negotiations with IOs? We examine these questions through a study of labor-related conditions in IMF loans. Using new data from IMF loan documents for IMF programs from 1980 to 2000, we test to see if citizens’ economic interests influence IMF conditionality. We examine the substance of loan conditions and identify those that require liberalization in the country's domestic labor market or that have direct effects on employment, wages, and social benefits. We find evidence that democratic countries with stronger domestic labor receive less intrusive labor-related conditions in their IMF loan programs. We argue that governments concerned about workers’ opposition to labor-related loan conditions negotiate with the Fund to minimize labor conditionality. The implication is that the Fund is responsive to domestic politics and citizens’ interests.