 Debt Bailouts and ConstitutionsThe Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics Abstract: A demand based theory of sub-national debt bailouts is presented. It is shown that revenue sharing (RS) arrangements alter the demand for bailouts among politicians with regional constituencies as a bailout usually implies a shift of taxation to the federal tier. Automatic RS may lead to the formation of pro-bailout coalitions formed by indebted states and states that are net recipients of the RS arrangement. Also, RS can act as a commitment device for compensating payments among state representatives, making a bailout politically rational. The model shows that the state debt bailouts approved by the Brazilian Senate prior to the enactment of the Fiscal Responsibility Act were fully consistent with politicians that maximize the proceeds accruing to their constituencies. Keywords: bailout; commitment; Constitutions; debt; federalism revenue sharing; soft budget constraints (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:862 Access Statistics for this paper More papers in The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics Contact information at EDIRC. |
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