Political Power and the Credibility of Government Debt

Avinash Dixit, John Londregan

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

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. We illustrate this using a formal model where the alternative use of wealth is to acquire human capital. Journal of Economic Literature Classification Numbers: D72, E60, H63.

Original languageEnglish (US)
Pages (from-to)80-105
Number of pages26
JournalJournal of Economic Theory
Volume94
Issue number1
DOIs
StatePublished - Sep 2000
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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