Income Inequality, Sovereign Debt, and Public Investment
نویسندگان
چکیده
We develop a political-economic model of sovereign debt that shows that income inequality leads to popular pressures on the government to use foreign debt to Þnance a redistribution of income at the expense of productive public investment. Recognizing this fact international lenders impose credit ceilings with the consequence that developing country borrowers invest less and grow slower. ∗We are grateful to Devashish Mitra for helpful suggestions.
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