The impact of macro-adjustment policies on the incomes of the poor—a review of alternative approaches

Conflicting hypotheses have been advanced about the effects of adjustment on income distribution and poverty. Reviews of IMF programmes conducted by staff members have concluded that ‘in general, Fund programs have improved rather than worsened income distribution’.1 This view is supported by Srinivasan: ‘Adjustment measures by eliminating imbalances and attaining a sustainable and efficient development path are likely to have a positive impact on the welfare of the poor.’2 In contrast, inegalitarian effects have been suggested by some analysts, stemming largely from the falling wage share associated with devaluation.3 Others have taken an agnostic position arguing that the effects will depend on the nature of the economy, and on the policy package adopted.4