Is Good Governance Rewarded? A Cross-National Analysis of Debt Forgiveness
41 Pages Posted: 25 Aug 2012
Date Written: 2002
This article analyses which factors determine the allocation of debt forgiveness. In particular, it is examined what role various aspects of governance play. The results indicate that countries’ need is a powerful determinant for debt forgiveness, whereas creditors’ political interest is not, apart from United States military interests. Of the various aspects of governance, only the extent to which governments are accountable, respect democratic rights as well as refrain from imposing burdens on business has a statistically significant influence. In order to set the right incentives and to ensure effectiveness of scarce financial resources, countries with good governance should be rewarded with a higher share of total debt forgiveness in the future.
Keywords: aid, debt, democracy, governance, regulatory burden
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