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Income Distribution, Sovereign Debt, And Public Investment

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  • Cem Karayalçin
  • Kathryn McCollister

Abstract

We develop a political economy model of sovereign debt that shows that income inequality leads to popular pressures on the government to use foreign debt to finance a redistribution of income at the expense of productive public investment. Recognizing this fact, international lenders impose credit ceilings with the consequence that developing country borrowers invest less and grow slower.

Suggested Citation

  • Cem Karayalçin & Kathryn McCollister, 2005. "Income Distribution, Sovereign Debt, And Public Investment," Economics and Politics, Wiley Blackwell, vol. 17(3), pages 351-365, November.
    • Handle: RePEc:bla:ecopol:v:17:y:2005:i:3:p:351-365
    DOI: 10.1111/j.0954-1985.2005.00157.x
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    References listed on IDEAS

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    Cited by:

    1. Carrera, Jorge & de la Vega, Pablo, 2021. "The impact of income inequality on public debt," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).

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