IDEAS home Printed from https://ideas.repec.org/a/eee/jcecon/v46y2018i4p1062-1081.html
   My bibliography  Save this article

It's easier to contract than to pay: Judicial independence and US municipal default in the 19th century

Author

Listed:
  • Dove, John A.

Abstract

It is well established in the literature that an independent judiciary can act as a signal of credibility by a sovereign state and 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 affects default rates using US 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 term length.

Suggested Citation

  • Dove, John A., 2018. "It's easier to contract than to pay: Judicial independence and US municipal default in the 19th century," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1062-1081.
    • Handle: RePEc:eee:jcecon:v:46:y:2018:i:4:p:1062-1081
    DOI: 10.1016/j.jce.2018.04.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0147596718300490
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jce.2018.04.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Daniel M. Klerman, 2005. "The Value of Judicial Independence: Evidence from Eighteenth Century England," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 1-27.
    2. Cameron,A. Colin & Trivedi,Pravin K., 2013. "Regression Analysis of Count Data," Cambridge Books, Cambridge University Press, number 9781107667273.
    3. Dove, John A., 2014. "Financial markets, fiscal constraints, and municipal debt: lessons and evidence from the panic of 1873," Journal of Institutional Economics, Cambridge University Press, vol. 10(1), pages 71-106, March.
    4. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part I: A Single Policy Task," American Economic Review, American Economic Association, vol. 97(1), pages 169-179, March.
    5. Rafael La Porta & Florencio Lopez-de-Silanes & Cristian Pop-Eleches & Andrei Shleifer, 2004. "Judicial Checks and Balances," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 445-470, April.
    6. Timothy Goodspeed, 2002. "Bailouts in a Federation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 409-421, August.
    7. Willard Long Thorp, 1926. "The Annals of the United States of America," NBER Chapters, in: Business Annals, pages 107-145, National Bureau of Economic Research, Inc.
    8. Tabarrok, Alexander & Helland, Eric, 1999. "Court Politics: The Political Economy of Tort Awards," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 157-188, April.
    9. Timur Kuran & Jared Rubin, 2018. "The Financial Power of the Powerless: Socio‐Economic Status and Interest Rates Under Partial Rule of Law," Economic Journal, Royal Economic Society, vol. 128(609), pages 758-796.
    10. Alesina, Alberto & Tabellini, Guido, 2008. "Bureaucrats or politicians? Part II: Multiple policy tasks," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 426-447, April.
    11. Richard Easterlin, 1960. "Interregional Differences in Per Capita Income, Population, and Total Income, 1840-1950," NBER Chapters, in: Trends in the American Economy in the Nineteenth Century, pages 73-140, National Bureau of Economic Research, Inc.
    12. Yosh Halberstam, 2016. "Trial and Error: Decision Reversal and Panel Size in State Courts," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(1), pages 94-118.
    13. Hayo, Bernd & Voigt, Stefan, 2007. "Explaining de facto judicial independence," International Review of Law and Economics, Elsevier, vol. 27(3), pages 269-290, September.
    14. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    15. Gordon, Sanford C. & Huber, Gregory A., 2007. "The Effect of Electoral Competitiveness on Incumbent Behavior," Quarterly Journal of Political Science, now publishers, vol. 2(2), pages 107-138, May.
    16. Gregory A. Huber & Sanford C. Gordon, 2004. "Accountability and Coercion: Is Justice Blind when It Runs for Office?," American Journal of Political Science, John Wiley & Sons, vol. 48(2), pages 247-263, April.
    17. Freyer, Tony A., 1979. "The Federal Courts, Localism, and the National Economy, 1865–1900," Business History Review, Cambridge University Press, vol. 53(3), pages 343-363, October.
    18. F. Andrew Hanssen, 2004. "Learning about Judicial Independence: Institutional Change in the State Courts," The Journal of Legal Studies, University of Chicago Press, vol. 33(2), pages 431-473, June.
    19. Feld, Lars P. & Voigt, Stefan, 2003. "Economic growth and judicial independence: cross-country evidence using a new set of indicators," European Journal of Political Economy, Elsevier, vol. 19(3), pages 497-527, September.
    20. Voigt, Stefan & Gutmann, Jerg & Feld, Lars P., 2015. "Economic growth and judicial independence, a dozen years on: Cross-country evidence using an updated Set of indicators," European Journal of Political Economy, Elsevier, vol. 38(C), pages 197-211.
    21. Wallis, John Joseph, 2005. "Constitutions, Corporations, and Corruption: American States and Constitutional Change, 1842 to 1852," The Journal of Economic History, Cambridge University Press, vol. 65(1), pages 211-256, March.
    22. Russell S. Sobel & Joshua C. Hall, 2007. "The Effect of Judicial Selection Processes on Judicial Quality: The Role of Partisan Politics," Cato Journal, Cato Journal, Cato Institute, vol. 27(1), pages 69-82, Winter.
    23. James M. Poterba & Kim Rueben, 1999. "State Fiscal Institutions and the U.S. Municipal Bond Market," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 181-208, National Bureau of Economic Research, Inc.
    24. Blundell, Richard & Griffith, Rachel & Van Reenen, John, 1995. "Dynamic Count Data Models of Technological Innovation," Economic Journal, Royal Economic Society, vol. 105(429), pages 333-344, March.
    25. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," American Economic Review, American Economic Association, vol. 94(4), pages 1034-1054, September.
    26. Qian, Yingyi & Roland, Gerard, 1998. "Federalism and the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 88(5), pages 1143-1162, December.
    27. Ronald J. Shadbegian, 1998. "Do Tax and Expenditure Limitations Affect Local Government Budgets? Evidence From Panel Data," Public Finance Review, , vol. 26(2), pages 118-136, March.
    28. Daniel Berkowitz & Karen Clay, 2006. "The Effect of Judicial Independence on Courts: Evidence from the American States," The Journal of Legal Studies, University of Chicago Press, vol. 35(2), pages 399-440, June.
    29. Biglaiser, Glen & Staats, Joseph L., 2012. "Finding the “Democratic Advantage†in Sovereign Bond Ratings: The Importance of Strong Courts, Property Rights Protection, and the Rule of Law," International Organization, Cambridge University Press, vol. 66(3), pages 515-535, July.
    30. Wallace Oates, 2005. "Toward A Second-Generation Theory of Fiscal Federalism," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 349-373, August.
    31. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, March.
    32. Carlos Berdejó & Noam Yuchtman, 2013. "Crime, Punishment, and Politics: An Analysis of Political Cycles in Criminal Sentencing," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 741-756, July.
    33. Tim Besley & Abigail Payne, 2003. "Judicial accountability and economic policy outcomes: evidence from employment discrimination charges," IFS Working Papers W03/11, Institute for Fiscal Studies.
    34. Timur Kuran & Jared Rubin, 2018. "The Financial Power of the Powerless: Socio†economic Status and Interest Rates under Partial Rule of Law," Economic Journal, Royal Economic Society, vol. 128(609), pages 758-796, March.
    35. Hanssen, F Andrew, 2000. "Independent Courts and Administrative Agencies: An Empirical Analysis of the States," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(2), pages 534-571, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. John Dove & William J. Byrd, 2022. "Judicial independence and lynching in historical context: an analysis of US States," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 16(3), pages 639-672, September.
    2. Mita Bhattacharya & John Inekwe, 2021. "Convergence in Sovereign Debt Defaults: Quantifying the Roles of Institutions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(3), pages 792-811, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John Dove & William J. Byrd, 2022. "Judicial independence and lynching in historical context: an analysis of US States," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 16(3), pages 639-672, September.
    2. John A. Dove, 2017. "Judicial Independence and US State Bond Ratings: An Empirical Investigation," Public Budgeting & Finance, Wiley Blackwell, vol. 37(3), pages 24-46, September.
    3. Dove, John A., 2015. "The effect of judicial independence on entrepreneurship in the US states," Economic Systems, Elsevier, vol. 39(1), pages 72-96.
    4. Ash, Elliott & MacLeod, W. Bentley, 2021. "Reducing partisanship in judicial elections can improve judge quality: Evidence from U.S. state supreme courts," Journal of Public Economics, Elsevier, vol. 201(C).
    5. Benjamin Broman & Georg Vanberg, 2022. "Feuding, arbitration, and the emergence of an independent judiciary," Constitutional Political Economy, Springer, vol. 33(2), pages 162-199, June.
    6. Claire Lim, 2009. "Turnover and Accountability of Appointed and Elected Judges," 2009 Meeting Papers 190, Society for Economic Dynamics.
    7. Constantina P. Tridimas & George Tridimas, 2020. "Is the UK Supreme Court rogue to un-prorogue Parliament?," European Journal of Law and Economics, Springer, vol. 49(2), pages 205-225, April.
    8. Elliott Ash & W. Bentley MacLeod, 2015. "Intrinsic Motivation in Public Service: Theory and Evidence from State Supreme Courts," Journal of Law and Economics, University of Chicago Press, vol. 58(4).
    9. George Tridimas, 2010. "Constitutional judicial review and political insurance," European Journal of Law and Economics, Springer, vol. 29(1), pages 81-101, February.
    10. Éric Langlais & Marie Obidzinski, 2013. "Elected vs appointed public law enforcers," EconomiX Working Papers 2013-35, University of Paris Nanterre, EconomiX.
    11. Iaryczower, Matias & Lewis, Garrett & Shum, Matthew, 2013. "To elect or to appoint? Bias, information, and responsiveness of bureaucrats and politicians," Journal of Public Economics, Elsevier, vol. 97(C), pages 230-244.
    12. Daniel Berkowitz & Karen Clay, 2007. "Legal Origins and the Evolution of Institutions: Evidence from American State Courts," Working Paper 320, Department of Economics, University of Pittsburgh, revised Jun 2007.
    13. Mordechai E. Schwarz, 2023. "A master of two servants: lessons from the israeli experience about the effect of separation of powers on public accountability and social welfare," Constitutional Political Economy, Springer, vol. 34(1), pages 59-87, March.
    14. James M. Snyder & David Stromberg & Claire S.H. Lim, 2010. "Measuring Media Influence on U.S. State Courts," 2010 Meeting Papers 1193, Society for Economic Dynamics.
    15. Guerriero, Carmine, 2006. "Dependent Controllers and Regulation Policies: Theory and Evidence," Privatisation Regulation Corporate Governance Working Papers 12204, Fondazione Eni Enrico Mattei (FEEM).
    16. Baskaran, Thushyanthan & Lopes da Fonseca, Mariana, 2021. "Appointed public officials and local favoritism: Evidence from the German states," Journal of Urban Economics, Elsevier, vol. 124(C).
    17. Lars P. Feld & Stefan Voigt, 2004. "Making Judges Independent – Some Proposals Regarding the Judiciary," CESifo Working Paper Series 1260, CESifo.
    18. Christian Bjørnskov, 2015. "Constitutional property rights protection and economic growth: evidence from the post-communist transition," Constitutional Political Economy, Springer, vol. 26(3), pages 247-280, September.
    19. Fiorino, Nadia & Gavoille, Nicolas & Padovano, Fabio, 2015. "Rewarding judicial independence: Evidence from the Italian Constitutional Court," International Review of Law and Economics, Elsevier, vol. 43(C), pages 56-66.
    20. Fleck, Robert K. & Hanssen, F. Andrew, 2010. "Repeated adjustment of delegated powers and the history of eminent domain," International Review of Law and Economics, Elsevier, vol. 30(2), pages 99-112, June.

    More about this item

    Keywords

    Judicial independence; Default; State and local public finance; Judicial selection; Courts; Credible commitment;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jcecon:v:46:y:2018:i:4:p:1062-1081. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622864 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.