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

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  • 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
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    2. 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.

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    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

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