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INCOME DISTRIBUTION, SOVEREIGN DEBT, AND PUBLIC INVESTMENT
Author(s) -
Karayalçin Cem,
McCollister Kathryn
Publication year - 2005
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/j.0954-1985.2005.00157.x
Subject(s) - redistribution (election) , economics , debt , external debt , internal debt , foreign direct investment , income distribution , monetary economics , economic inequality , debt levels and flows , redistribution of income and wealth , distribution (mathematics) , investment (military) , financial system , inequality , international economics , politics , macroeconomics , political science , mathematics , law , mathematical analysis , unemployment
We develop a political economy model of sovereign debt that shows that income inequality leads to popular pressures on the government to use foreign debt to finance 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.