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Why are there serial defaulters? Evidence from constitutions
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Kohlscheen, Emanuel (2007) Why are there serial defaulters? Evidence from constitutions. Journal of Law and Economics, Volume 50 (Number 4). pp. 713-730. doi:10.1086/519814 ISSN 0022-2186.
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Official URL: http://dx.doi.org/10.1086/519814
Abstract
Presidential democracies were 4.9 times more likely than parliamentary democracies to default on external debts between 1976 and 2000. In this article I argue that the explanation for the serial defaults by a number of sovereign borrowers lies in their constitutions. Ceteris paribus, parliamentary democracies are less likely than presidential democracies to default on their liabilities because the confidence requirement creates a credible link between economic policies and the executive's political survival. This link tends to strengthen the repayment commitment when politicians are opportunistic. I show that this effect is large in the contemporary world even when the comparison is restricted to countries that are similar in terms of colonial origin, geography, and economic variables. Since a country's form of government is typically chosen at the time of independence and is highly persistent over time, constitutions can explain why debt policies in developing countries are related to individual histories.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HC Economic History and Conditions K Law [LC] |
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Divisions: | Faculty of Social Sciences > Centre for the Study of Globalisation and Regionalisation | ||||
Journal or Publication Title: | Journal of Law and Economics | ||||
Publisher: | University of Chicago Press | ||||
ISSN: | 0022-2186 | ||||
Official Date: | November 2007 | ||||
Dates: |
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Volume: | Volume 50 | ||||
Number: | Number 4 | ||||
Number of Pages: | 18 | ||||
Page Range: | pp. 713-730 | ||||
DOI: | 10.1086/519814 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published |
Data sourced from Thomson Reuters' Web of Knowledge
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