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A Model of Sovereign Debt in Democracies, Ali Alichi

This paper develops and empirically tests a political economy model of sovereign debt. The main incentive for repaying sovereign debt is to maintain access to international capital markets. However, in a democracy, one generation may choose default regardless of its consequences for future generations. An old generation with little concern for its country's access to capital markets can force a default on debt if it has the majority of voters. On the other hand, if the younger generation is more numerous, it can force repayment of previously defaulted debt. Other voter heterogeneities, such as in income, can generate similar results
Table Of Contents
Intro -- Contents -- I. Introduction -- II. Relevant Literature and Our Contribution -- III. The Model -- Theoretical Model -- A. Insurance Contracts -- B. Definition of Default -- C. Sequence of Events -- D. The Foreign Insurer -- E. The Country -- The Voting Process -- The Turn-Out Rate -- The Old Voters -- The Young Voters -- F. Contract Concepts -- Default-Free Contract -- Default-Free Contract for Quadratic Preferences -- Default-Repayment Contract -- Comparison of Contract Conditions -- Default-Renegotiation Contract -- G. Income Heterogeneity and Changes in Population Mixture -- IV. Empirical Results -- A. List of Countries -- B. Proofs
Literary Form
non fiction
1st ed.
Bibliographic Level Mode of Issuance: Monograph
Physical Description
1 online resource (36 pages), illustrations, tables.
Specific Material Designation
Form Of Item

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