It's Easier to Contract Than to Pay: Judicial Independence and U.S. Municipal Default in the 19th Century

55 Pages Posted: 4 May 2017 Last revised: 27 Apr 2018

See all articles by John A. Dove

John A. Dove

Troy University - Manuel H. Johnson Center for Political Economy

Multiple version iconThere are 2 versions of this paper

Date Written: April 2018

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.

Keywords: Judicial Independence, Default, State and Local Public Finance, Judicial Selection, Courts, Credible Commitment

JEL Classification: H12, H73, H74, N21, P48

Suggested Citation

Dove, John A., It's Easier to Contract Than to Pay: Judicial Independence and U.S. Municipal Default in the 19th Century (April 2018). Journal of Comparative Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2962074 or http://dx.doi.org/10.2139/ssrn.2962074

John A. Dove (Contact Author)

Troy University - Manuel H. Johnson Center for Political Economy ( email )

Bibb Graves Hall
Troy, AL 36082
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
15
Abstract Views
197
PlumX Metrics