Evaluating the Welfare Effects of International Bankruptcy Regimes in a Political Economy Model

Burcu Eyigungor and Satyajit Chatterjee ()

No 645, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: We evaluate the welfare benefits of international bankruptcy regimes in a political economy model of debt and default. We show that the socially optimal bankruptcy regime is likely to feature lower restructuring costs than the politically optimal bankruptcy regime. To the extent the current regime reflects the political preferences of borrowing countries, a case can be made for an international bankruptcy regime aimed at reducing (but not eliminating) restructuring costs.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:645

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