« Kang on race and democratic contestation | Main | Abrajano and Singh on News, Immigration Reform, and Latinopolitical attitudes »

Saiegh on Credible Commitments and the State in Argentina

Abstract: The notion that governments bound by the rule of law are less likely to expropriate private wealth has been a prominent idea since the publication of North and Weingast’s seminal article on public borrowing in seventeenth-century England. However, this view has been challenged recently. For example, Stasavage (2003) argues that constitutional checks and balances are neither a necessary nor a sufficient condition to create a credible commitment to secure property rights. One of the main shortcomings of the literature, however, is that it has tried to settle the debate by looking at evidence on sovereign borrowing from the same pair of countries (England and France). This article seeks to overcome such limitation by focusing on the link between representative government and public borrowing in Argentina. I present an “analytic narrative” of the country’s rags-to-riches story in the nineteenth century. First, I use historical evidence to document the relationship between absolute government, the absence of long-term borrowing, and the use of money creation to finance public deficits in the period between 1820 and 1862. Next, I examine public finance in the period between 1863 and 1913, when constitutional checks and balances were finally set up. I complement the historical narrative with an econometric analysis using time-series data on the partisan control of government, monetary policies, and public borrowing. The Argentine experience suggests that while constitutional checks and balances can improve possibilities for credible commitment, they are a necessary but not a sufficient condition for this to occur.

Sebastian M. Saiegh (2007), “North and Weingast Revisited: Credible Commitments and Public Borrowing in the Pampas,” unpublished paper. Available here.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)