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Democracy, capital flows, and odious debt

This paper relates democracy, public and private international capital flows, and odious debt. Democracy commits a ruler to pass borrowed funds on to the private sector which builds the country's international collateral, and the consequent rise in the credit ceiling is a Pareto-improvement within a range because the ruler can appropriate a smaller share of the rising loan. However, the ruler may still impose odious debt in the sense that the private sector prefers the country to borrow less. Under certain conditions, a fall in the world interest rate or a rise in productivity growth increases the optimal levels of democracy, borrowing, investment, and welfare. I offer suggestive evidence from a global panel.
Year of publication:
2009
Authors: Janus, Thorsten
Published in:
The Journal of International Trade & Economic Development. - Taylor & Francis Journals, ISSN 0963-8199. - Vol. 18.2009, 2, p. 207-234
Publisher: Taylor & Francis Journals
Subject: democracy | capital flows | odious debt | globalization
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