Macroeconomic Structural Adjustment and Civic Cohesion: State-Dependent Effects of IMF Programs in the Global South

Abstract

Do externally imposed macroeconomic reforms damage national cohesion? This paper examines how IMF Structural Adjustment Programs (SAPs) relate to civic nationalism in the Global South. We present a framework in which adjustment policies affect welfare through both material conditions and civic identity, and argue that the consequences of SAPs depend on domestic economic and institutional environments. Using a balanced panel of 15 countries from 1991–2018, we find no robust immediate average effect of SAP participation on civic cohesion once country heterogeneity and global shocks are absorbed; instead, effects emerge with a lag. SAPs exhibit strongly state-dependent consequences, becoming significantly more damaging to civic cohesion when economic growth is weak, but far less harmful in expanding economies. Moreover, ethnic fractionalization amplifies the adverse civic effects of SAP participation, while more inclusive political institutions partially buffer them. Civic cohesion is also highly persistent, indicating that adjustment policies interact with deep structural conditions rather than producing uniform short-term identity shifts. These findings suggest that the sociopolitical impact of IMF programs depends critically on growth performance and social structure.