The anatomy of sovereign debt crises: Lessons from the American state defaults of the 1840s

In theory, sovereign states with taxing powers should not have to default on their debts, but in practice they sometimes do default. In the context of the U.S. state defaults of the 1840s, the paper draws attention to a neglected factor in explanations of sovereign defaults, namely, revenue structur...

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Bibliographic Details
Published inJapan and the world economy Vol. 10; no. 3; pp. 267 - 293
Main Authors Sylla, Richard, Wallis, John Joseph
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.07.1998
Elsevier
North-Holland
SeriesJapan and the World Economy
Subjects
Capital
Debt
Debt crises
Debt management
Debt repayment
Default
External debt
Public debt
Public expenditure
Sovereign debt
Taxes
U.S. states
U.S.A
U.S. states
F34
H21
Debt crises
N21
Sovereign debt
Default
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Summary:In theory, sovereign states with taxing powers should not have to default on their debts, but in practice they sometimes do default. In the context of the U.S. state defaults of the 1840s, the paper draws attention to a neglected factor in explanations of sovereign defaults, namely, revenue structure, or the mix of revenue sources used to fund state expenditures. Constraints of revenue structure interacted with political considerations and economic expectations to cause nine states to default on their debts in the early 1840s. We identify two cases of default: developed states that chose to default and less developed states that had little choice but to default.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0922-1425
1879-2006
DOI:10.1016/S0922-1425(97)00034-0