Sovereign credit and political survival in democracies. (4th March 2018)

• Record Type: Journal Article
• Authors: DiGiuseppe, Matthew; Shea, Patrick E.
• Is Part Of: Business and politics. Volume 20:Number 3(2018)
• Page Start: 360
• Page End: 389
• Publication Date: 2018-03-04
• Subjects: Sovereign credit, -- political survival, -- debt markets; Business and politics -- Periodicals; Business planning -- Periodicals; Affaires et politique -- Périodiques; Entreprises -- Planification -- Périodiques; Business and politics; Business planning; Periodicals; 322.3
• DOI: 10.1017/bap.2018.2
• Languages: English
• ISSNs: 1369-5258

Abstract

Abstract: Models of distributive politics often assume that fixed budgets constrain the efforts of incumbents to retain power. Yet, significant variation exists in politicians' abilities to push distributive costs forward by funding current fiscal policy through sovereign borrowing. This article theorizes how and when variation in sovereign credit access influences the central goal of democratic incumbents: political survival. Credit allows incumbents to reward supporters without immediately extracting domestic revenue. Excessive borrowing, however, risks higher interest rates or possible market exclusion. Considering sovereign borrowing's benefits and costs, we argue that the marginal effect of credit access on political survival is greatest for those incumbents that require other parties to implement fiscal policy. An analysis of incumbent party tenure in seventy-one democracies from 1977–2007 demonstrates that affordable sovereign finance is associated with longer tenures under divided government but has no significant effect on survival under unified governments.