American Economic Review Vol. 96 No. 1 2006

Odious Debt

Seema Jayachandran¹; Michael Kremer²

¹ University of California, Berkeley, 140 Warren Hall, MC 7360, Berkeley, CA 94720, and Department of Economics, UCLA. · ² Department of Economics, Harvard University, 200 Littauer Center, Cambridge, MA 02138, The Brookings Institution, Center for Global Development, and National Bureau of Economic Research.

Abstract

Trade sanctions are often criticized as ineffective because they create incentives for evasion or as harmful to the target country's population. Loan sanctions, in contrast, could be self-enforcing and could protect the population from being saddled with “odious debt” run up by looting or repressive dictators. Governments could impose loan sanctions by instituting legal changes that prevent seizure of countries' assets for nonrepayment of debt incurred after sanctions were imposed. This would reduce creditors' incentives to lend to sanctioned regimes. Restricting sanctions to cover only loans made after the sanction was imposed would help avoid time-consistency problems.

DOI

10.1257/000282806776157696

Volume

96

Issue

1

Pages

82-92

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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