Sovereign Debt and Repudiation: The Emerging-Market Debt Crisis in the U.S. States, 1839-1843

50 Pages Posted: 5 Oct 2005 Last revised: 24 Aug 2009

See all articles by John Joseph Wallis

John Joseph Wallis

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Richard Sylla

New York University - Stern School of Business, Department of Economics

Arthur Grinath

Microeconomic Consulting and Research Associates, Inc. (MiCRA)

Date Written: September 2004

Abstract

In 1841 and 1842, eight states and the Territory of Florida defaulted on their sovereign debts. Traditional histories of the default crisis have stressed the causal role of the depression that began with the Panic of 1837, unexpected revenue shortfalls from canal and bank investments as a result of the depression, and an unwillingness of states to raise tax rates. This paper shows that none of these stylized facts fits the experience of states at all well. The majority of state debts in default in 1842 were contracted after the Panic of 1837; most states did not expect canal investments to return substantial revenues by 1841 and so could not experience unexpected shortfalls in those revenues; and, finally, most states were willing to raise tax rates substantially. The relationship between land sales and land values explains much of the timing of state borrowing and the default experience of western and southern states. Pennsylvania and Maryland defaulted because they postponed the imposition of a state property tax until it was too late.

Suggested Citation

Wallis, John J. and Sylla, Richard and Grinath, Arthur, Sovereign Debt and Repudiation: The Emerging-Market Debt Crisis in the U.S. States, 1839-1843 (September 2004). NBER Working Paper No. w10753. Available at SSRN: https://ssrn.com/abstract=590763

John J. Wallis (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3552 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Richard Sylla

New York University - Stern School of Business, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0869 (Phone)

Arthur Grinath

Microeconomic Consulting and Research Associates, Inc. (MiCRA) ( email )

Demonet Building
1155 Connecticut Avenue, N.W., Suite 900
Washington, DC 20036
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
69
Abstract Views
1,608
rank
348,159
PlumX Metrics