In this paper I test two models of strategic debt behavior. The general idea is that if a government anticipates the possibility of defeat in the next election it will try to use the debt strategically in order to influence the policy of its successor. Previous empirical studies have either...

This paper empirically tests whether the soft budget constraint is caused by a dynamic commitment problem, i.e., the inability of a supporting organization to commit itself not to extend more resources ex post to a budget-constrained organization than it was prepared to provide ex ante. It uses...

The paper examines the accumulation of debt by Swedish local governments. I find that right-wing governments accumulate more debt when facing a higher probability of defeat, whereas the opposite occurs for left-wing governments. These effects are sizable: a right-wing government increases its...