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| Author: | Dixit, A. Londregan, J. |
| Title: | Political power and the credibility of government debt |
| Journal: | Journal of Economic Theory
2000 : SEP, VOL. 94:1, p. 80-105 |
| Index terms: | POWER DEBT GOVERNMENT |
| Language: | eng |
| Abstract: | If political power and motives to invest in government bonds are positively correlated across voting groups, then a self-selection equilibrium can arise where the government's promise to repay its debt is credible. The authors illustrate this using a formal model where the alternative use of wealth is to acquire human capital. Governments can renege in numerous ways on their promises to service and repay their debt. |
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