Evaluating the Welfare Effects of International Bankruptcy Regimes in a Political Economy Model
We evaluate the welfare benefits of international bankruptcy regimes in a political economy model of debt and default. We show that the socially optimal bankruptcy regime is likely to feature lower restructuring costs than the politically optimal bankruptcy regime. To the extent the current regime reflects the political preferences of borrowing countries, a case can be made for an international bankruptcy regime aimed at reducing (but not eliminating) restructuring costs.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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