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FAMP ANDRONICEANU Armenia and OHANYAN Gurgen
CCASP IMF POLICIES AND THEIR EFFECTS ON EDUCATION IN ROMANIA

2. LITERATURE REVIEW

There is a bulk amount literature that claims IMF adverse effects on social spending, especially on health

care and education. While, we have chosen those pieces that are directly related with Romanian
education sector and IMF program effects on education. Even, since 1986, the IMF has been highly
criticized for affecting the poorest and most vulnerable sectors of society that are most dependent on the

state for valuable public services such as health and education (Remmer, 1986, p. 7). Likewise, other
prominent scholars note that burden of cuts in public spending as a result of IMF’s fiscal adjustment spills
on economic services and on education and health care, rather than on defense (Pinstrup-Andersen et

al, 1987, p. 77).

Therefore, the IMF’s watchdog Independent Evaluation Office (IEO), in order to tackle such critiques
towards the institution, published a circumstantial review of Fund’s fiscal adjustment (Martin & Segura-

Ubiergo, 2004). The authors employing Autoregressive Integrated Moving Average (ARIMA) model
techniques, also a two-stage estimation method to correct for the endogeneity of IMF programs, find that

social spending does not decline under IMF-supported programs. The data covers 146 countries over
1985-2000 period. Yet, the paper does not cover efficiency of public spending, i.e. IMF impact on health PROCEEDINGS OF THE 11 TH ADMINISTRATION AND PUBLIC MANAGEMENT INTERNATIONAL CONFERENCE ”Strategic Management for Local Communities” 30 th – 31 st October 2015 Bucharest
and education outcome indicators have not been evaluated, but total expenditures on health and

education as a share of GDP.At the same, time this paper is considered first attempt to assess empirically
IMF conditionality effects on public spending. As Nooruddin& Simmons (2006) underline thatpreceding
studies had problems either with data availability mostly based on anecdotal evidence or did not count

selection bias or endogeneity. Furthermore, they note that Martin & Segura-Ubiego (2004) study has
solved the issue with endogeneity and it is more rigorous, but it is not bereft of a serious flaw. Particularly,
the paper has not accounted political considerations regarding with governments cut spending as a

response to IMF austere measures. Thus, Nooruddin & Simmons (2006, p. 1013) includes political
consideration in their regression and questions the following two issues:

“First, we may find that the effect of IMF programs is conditional on the regime type of the recipient

country, and possibly that they have different effects in different political systems. Second, we may find
that the precise impact of increasing the level of democracy in a given country on its level of social

spending depends on whether there is an IMF program in place”.

Including political considerations in the regression, the authors find strong and robust evidence towards
IMF adverse effects on health and education sector (Nooruddin & Simmons, 2006, p. 1027).

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