It's Easier to Contract than to Pay : Judicial Independence and U.S. Municipal Default in the 19th Century

It is well established in the literature that an independent judiciary can act as a signal of credibility by a sovereign state and also as a guarantor of creditor rights. However, to date there has been little systematic work analyzing how an independent judiciary reacts to fiscal stress and public sector default. This article addresses that very question by evaluating how and if judicial independence effects default rates using U.S. municipal data through the nineteenth century. Overall, the results do indicate that greater judicial independence is associated with a significantly lower likelihood of default. This channel largely occurs through the method by which a member of a state's court of last resort is selected (either appointment or popular election) and also term length