Institutional Quality and Debt Relief: A Political Economy Approach

Recent shifts in the global debt relief architecture has meant that countries with superior institutions are often rewarded with increasinf aid and debt relied, an incentive for debtor countries to strategically improve their institutions prior to seeking debt relief. This paper contributes to the literature by developing and empirically testing a political economy model of the possible impact of this shift on the motivations of politicians and bureaucrats in debtor countries. The findings suggest that debtor countries have quickloy adapted to the shift by strategically improving in key areas of institutional governance prior to applying for dect relief.