TY  - RPRT
        AU  - Mehrotra, Santosh
AU  - Hassan, Shady
        TI  - The 'Despotic Leviathan' and Its Financial Architecture: How IMF Conditionalities Deepen Inequality
        PY  - 2025/Dec/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 18350
        UR  - https://www.iza.org/publications/dp18350
        AB  - This paper examines how IMF policies contribute to the inequality in MENA, and to a Middle-Income Trap (MIT).  Developing a theory  expanding Acemoglu and Robinson’s “Narrow Corridor” framework, it shows how IMF conditions align domestic elite incentives with creditor interests through a principal-agent lens. Using 2020-2025 data, its analysis reveals IMF monetary policies create rent-seeking structures that institutionalize inequality and suppress growth. The paper identifies an “engineered r>g dynamic” as a quantifiable signature of this extraction, empirically verified in Egypt. It establishes a causal link between financial/monetary policy (interest rates, debt compounding) and the “Despotic Leviathan” state formation.
        KW  - political economy
KW  - domestic debt
KW  - inequality
KW  - IMF conditionality
KW  - state capture
KW  - Middle-Income Trap
KW  - Egypt
        ER  -