Hostname: page-component-848d4c4894-nmvwc Total loading time: 0 Render date: 2024-06-19T07:08:31.216Z Has data issue: false hasContentIssue false
  • English
  • Français

US State constitutional entrenchment and default in the 19th century

Published online by Cambridge University Press:  07 August 2019

John A. Dove  and
Andrew T. Young
John A. Dove
Affiliation:
Manuel H. Johnson Center for Political Economy, Troy University, Troy, AL USA 36082
Andrew T. Young*
Affiliation:
Rawls College of Business, Texas Tech University, Lubbock, TX USA 79409
*
*Corresponding author. Email: a.t.young@ttu.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

Constitutional scholars emphasize the importance of an enduring, stable constitutional order, which North and Weingast (1989) argue is consistent with credible commitments to sustainable fiscal policies. However, this view is controversial and has received little empirical study. We use 19th-century US state-level data to estimate relationships between constitutional design and the likelihood of a government default. Results indicate that more entrenched and less specific constitutions are associated with a lower likelihood of default.

Keywords

Defaultdebtfiscal crisisconstitutionscredible commitmententrenchment
Type
Research Article
Information
Journal of Institutional Economics , Volume 15 , Issue 6 , December 2019 , pp. 963 - 982
Copyright
Copyright © Millennium Economics Ltd 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aghion, P. and Bolton, P. (2003), ‘Incomplete Social Contracts’, Journal of the European Economic Association, 1(1): 38–67.Google Scholar
Aguiar, M. and Amador, M. (2014), ‘Sovereign Debt’, in Gopinath, G., Helpman, E. and Rogoff, K. (eds) Handbook of International Economics, Volume 4. Amsterdam: Elsevier.Google Scholar
Aguiar, M. and Gopinath, G. (2006), ‘Defaultable Debt, Interest Rates and the Current Account’, Journal of International Economics, 69(1): 64–83.Google Scholar
Albert, R. (2014), ‘Constitutional Amendment by Constitutional Desuetude’, American Journal of Comparative Law, 62(3): 641–686.Google Scholar
Anckar, D. and Karvonen, L. (2015), ‘Constitutional Amendment Methods in the Democracies of the World’, in Mikulego, P., Kuliga, A., Karpa, J. and Kucy, G. (eds) Ustroje tradycje i porównania (Regimes: Traditions and Comparisons), Warszawa: Wydawnictwo Sejmove.Google Scholar
Beach, B. (2017), ‘Do Markets Reward Constitutional Reform? Lessons from America's State Debt Crisis’, Working Paper, available at http://bbbeach.people.wm.edu/Papers/Beach_Constitutions.pdf (accessed 8 July 2019).Google Scholar
Berkowitz, D. and Clay, K. (2005), ‘American Civil Law Origins: Implications for State Constitutions’, American Law and Economics Review, 7(1): 62–84.Google Scholar
Björnskov, C. and Voigt, S. (2014), ‘Constitutional Verbosity and Social Trust’, Public Choice, 161(1/2): 91–112.Google Scholar
Blume, L., Müller, J. and Voigt, S. (2009), ‘The Economic Effects of Direct Democracy’, Public Choice, 140(3–4): 431–461.Google Scholar
Bradbury, J. C. and Crain, W. M. (2001), ‘Legislative Organization and Government Spending: Cross-Country Evidence’, Journal of Public Economics, 82(3): 309–325.Google Scholar
Buchanan, J. M. (1975), The Limits of Liberty: Between Anarchy and Leviathan, Chicago, IL: University of Chicago Press.Google Scholar
Buchanan, J. M. and Tullock, G. (1962), The Calculus of Consent: Logical Foundations of Constitutional Democracy, Ann Arbor, MI: University of Michigan Press.Google Scholar
Bulow, J. and Rogoff, K. (1989), ‘Sovereign Debt: Is to Forgive to Forget?’ American Economic Review, 79(1): 43–50.Google Scholar
Chari, V. V., Kehoe, P. J. and Prescott, E. C. (1989), ‘Time Consistency and Policy’, in Barro, R. J. (ed.) Modern Business Cycle Theory, Cambridge, MA: Harvard University Press.Google Scholar
Congleton, R. D. (2007), ‘From Royal to Parliamentary Rule without Revolution: The Economics of Constitutional Exchange within Divided Governments’, European Journal of Political Economy, 23(2): 261–284.Google Scholar
Congleton, R. D. (2011), Perfecting Parliament: Constitutional Reform, Liberalism, and the Rise of Western Democracy, Cambridge, UK: Cambridge University Press.Google Scholar
Cox, G. W. (2012), ‘Was the Glorious Revolution a Constitutional Watershed?’ Journal of Economic History, 72(3): 567–600.Google Scholar
De Lara, Y. G. and Greif, A. and Jha, S. (2008), ‘The Administrative Foundations of Self-Enforcing Constitutions’, American Economic Review, 98(2): 105–109.Google Scholar
Depken, C. A. II. and LaFountain, C. L. (2006), ‘Fiscal Consequences of Public Corruption: Empirical Evidence from State Bond Ratings’ Public Choice, 126(1–2): 75–85.Google Scholar
Dobbin, F. (1994), Forging Industrial Policy: The United States, Great Britain, and France in The Railway Age, Cambridge: Cambridge University Press.Google Scholar
Dove, J. A. (2012), ‘Credible Commitments and Constitutional Constraints: State Debt Repudiation and Default in Nineteenth Century America’, Constitutional Political Economy, 23(1): 66–93.Google Scholar
Dove, J. A. (2014), ‘Financial Markets, Fiscal Constraints, and Municipal Debt: Lessons and Evidence from the Panic of 1873’, Journal of Institutional Economics, 10(1): 71–106.Google Scholar
Dove, J. A. (2016), ‘Did Fiscal Constraints Prevent Default? Historical Evidence from US Municipalities’, Economics of Governance, 17(2): 185–209.Google Scholar
Eaton, J. and Gersovitz, M. (1981), ‘Debt with Potential Repudiation: Theoretical and Empirical Analysis’, Review of Economic Studies, 48(2): 289–309.Google Scholar
Elkins, Z., Ginsburg, T. and J. (2009), The Endurance of National Constitutions, Cambridge University Press.Google Scholar
Elster, J. (1979), Ulysses and the Sirens, Cambridge, UK: University of Cambridge Press.Google Scholar
Frye, T. (2004), ‘Credible Commitment and Property Rights: Evidence from Russia’, American Political Science Review, 98(3): 453–466.Google Scholar
Frye, T. and Shleifer, A. (1997), ‘The Invisible Hand and the Grabbing Hand’, American Economic Review, 87(2): 354–358.Google Scholar
Ginsburg, T. (2010a), ‘Constitutional Specificity, Unwritten Understandings and Constitutional Agreement’, in Sajo, A. and Utz, R. (eds) Constitutional Topography: Values and Constitutions, The Hague, Netherlands: Eleven International Publishing.Google Scholar
Ginsburg, T. (2010b), ‘Public Choice and Constitutional Design’, in Farber, D. A. and O'Connell, A. J. (eds) Research Handbook on Public Choice and Public Law, Cheltenham: Edward Elgar Publishing.Google Scholar
Ginsburg, T. and Melton, J. (2015), ‘Does the Constitutional Amendment Rule Matter at All? Amendment Cultures and the Challenges of Measuring Amendment Difficulty’, International Journal of Constitutional Law, 13(3): 686–713.Google Scholar
Ginsburg, T. and Posner, E. A. (2010), ‘Subconstitutionalism’, Stanford Law Review, 62(6): 1583–1628.Google Scholar
Hammons, C. W. (1999), ‘Was James Madison Wrong? Rethinking the American Preference for Short, Famework-Oriented Constitutions’, American Political Science Review, 93(4): 837–849.Google Scholar
Hillhouse, A. M. (1936), Municipal Bonds: A Century of Experience, New York, NY: Prentice-Hall.Google Scholar
Hodgson, G. M. (2017), ‘1688 and All That: Property Rights, the Glorious Revolution and the Rise of British Capitalism’, Journal of Institutional Economics, 13(1): 79–107.Google Scholar
Kydland, F. E. and Prescott, E. C. (1977), ‘Rules Rather than Discretion: The Inconsistency of Optimal Plans’, Journal of Political Economy, 85(3): 473–491.Google Scholar
La Porta, R., López-de-Silanes, F. and Pop-Eleches, C. (2004), ‘Judicial Checks and Balances’, Journal of Political Economy, 112(2): 445–469.Google Scholar
Leeson, P. T. (2011), ‘Government, Clubs, and Constitutions’, Journal of Economic Behavior and Organization, 80(2): 301–308.Google Scholar
Liphardt, A. (1999), Patterns of Democracy: Government Forms and Performance in Thirty-Six Democracies, Hartford, CT: Yale University Press.Google Scholar
Lorenz, A. (2005), ‘How to Measure Constitutional Rigidity: Four Concepts and Two Alternatives’, Journal of Theoretical Politics, 17(3): 339–361.Google Scholar
Lutz, D. (1994), ‘Toward a Theory of Constitutional Amendment’, American Political Science Review, 88(2): 355–370.Google Scholar
Maher, C. S., Deller, S. C. and Stallmann, J. I. (2016), ‘The Impact of Tax and Expenditure Limits on Municipal Credit Ratings’, American Review of Public Administration, 46(5): 592–613.Google Scholar
McGrane, R. C. (1935), Foreign Bondholders and American State Debts, New York: The Macmillan Company.Google Scholar
Mittal, S. and Weingast, B. R. (2011), ‘Self-Enforcing Constitutions: With an Application to Democratic Stability in America's First Century’, Journal of Law, Economics, & Organization, 29(2): 278–302.Google Scholar
Montenegro, A. A. (1995), ‘Constitutional Design and Economic Performance’, Constitutional Political Economy, 6(2): 161–169.Google Scholar
North, D. C. (1991), ‘Institutions’, Journal of Economic Perspectives, 5(1): 97–112.Google Scholar
North, D. C. and Weingast, B. R. (1989), ‘Constitutions and Commitment: The Evolutions of Institutions Governing Public Choice in Seventeenth Century England’, Journal of Economic History, 49(4): 803–832.Google Scholar
Panizza, U., Sturzenegger, F. and Zettelmeyer, J. (2009), ‘The Economics and Law of Sovereign Debt and Default’, Journal of Economic Literature, 47(3): 651–698.Google Scholar
Persson, T. and Tabellini, G. (2003), The Economic Effects of Constitutions, Cambridge, MA: MIT Press.Google Scholar
Persson, T. and Tabellini, G. (2004), ‘Constitutional Rules and Fiscal Policy Outcomes’, American Economic Review, 94(1): 25–45.Google Scholar
Persson, T., Roland, G. and Tabellini, G. (1997), ‘Separation of Powers and Political Accountability’, Quarterly Journal of Economics, 112(4): 1163–1202.Google Scholar
Pinsky, D. E. (1963), ‘State Constitutional Limitations on Public Industrial Financing: An Historical and Economic Approach’, University of Pennsylvania Law Review, 111(3): 265–327.Google Scholar
Plümper, T. and Martin, C. W. (2003), ‘Democracy, Government Spending, and Economic Growth: A Political-Economic Explanation of the Barro-Effect. Public Choice, 117(1): 27–50.Google Scholar
Prescott, E. C. (1977), ‘Should Control Theory be Used for Economic Stabilization?’ Carnegie-Rochester Conference Series on Public Policy, 7(1): 13–38.Google Scholar
Rasch, E. and Congleton, R. D. (2006), ‘Constitutional Amendment Procedures’, in Congleton, R. D. and Swedenborg, B. (eds) Democratic Constitutional Design and Public Policy: Analysis and Evidence, Cambridge, MA: MIT Press.Google Scholar
Ratchford, B. U. (1941), American State Debts, Durham, NC: Duke University Press.Google Scholar
Rochet, J-C. (2006), ‘Optimal Sovereign Debt: An Analytical Approach’, Research Department Publications 4477, Inter-American Development Bank.Google Scholar
Rubenfeld, J. (2008), Freedom in Time: A theory of Constitutional Self-Government, New Haven, CT: Yale University Press.Google Scholar
Salter, A. W. (2015), ‘Rights to the Realm: Reconsidering Western Political Development’, American Political Science Review, 109(4): 725–734.Google Scholar
Salter, A. W. and Young, A. T. (2019), ‘Polycentric Sovereignty: The Medieval Constitution, Governance Quality, and the Wealth of Nations’, Social Science Quarterly, 100(4): 1241–1253.Google Scholar
Scott, W. A. (1893), The Repudiation of State Debts, Boston, MA: Thomas Y. Crowell.Google Scholar
Shugerman, J. H. (2012), The People's Court: Pursuing Judicial Independence in America, Cambridge, MA: Harvard University Press.Google Scholar
Stasavage, D. (2002), ‘Credible Commitment in Early Modern Europe: North and Weingast Revisited’, Journal of Law, Economics, and Organization, 18(1): 155–186.Google Scholar
Summers, M. W. (1984), Railroads, Reconstruction, and the Gospel of Prosperity: Aid Under The Radical Republicans, 1865–1877, Princeton: Princeton University Press.Google Scholar
Swain, H. H. (1898), Economic Aspects of Railroad Receiverships, New York: Macmillan Company.Google Scholar
Tarabar, D. and Young, A. T. (2019), ‘What Constitutes a Constitutional Amendment Culture? SSRN Working Paper, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3401894 (accessed 8 July 2019).Google Scholar
Tejedo-Rodriguez, I. and Wallis, J. J. (2012), ‘Fiscal Institutions and Fiscal Crises’, in Conti-Brown, P. and Skeel, D. A. (eds) When States Go Broke: The Origins, Context, and Solutions For the American States in Fiscal Crisis, New York: Cambridge University Press.Google Scholar
Thorp, W. L. (1926), The Annals of the United States of America. Business Annals, National Bureau of Economic Research, Washington, DC.Google Scholar
Tsebelis, G. (2002), Veto Players: How Political Institutions Work, Princeton, NJ: Princeton University Press.Google Scholar
Tsebelis, G. (2017), ‘The Time Inconsistency of Long Constitutions: Evidence from the World’, European Journal of Political Research, 56(4): 820–845.Google Scholar
Tsebelis, G. and Nardi, D. J. (2016), ‘A Long Constitution is a (Positively) Bad Constitution: Evidence from OECD Countries’, British Journal of Political Science, 46(2): 457-478.Google Scholar
Versteeg, M. and Zackin, E.. (2016), ‘Constitutions Unentrenched: Toward an Alternative Theory of Constitutional Design’, American Political Science Review, 110(4): 657–674.Google Scholar
Voigt, S. (2011), ‘Positive Constitutional Economics II – A Survey of Recent Developments’, Public Choice, 146(1): 205–226.Google Scholar
Waldron, J. J. (1999), Law and Disagreement, New York, NY: Oxford University Press.Google Scholar
Wallis, J. J. (2001), ‘What Caused the Crisis of 1839?’ NBER Historical Paper No. 133.Google Scholar
Wallis, J. J. (2005), ‘Constitutions, Corporations, and Corruption: American States and Constitutional Change, 1842 to 1852’, Journal of Economic History, 65(1): 211–256.Google Scholar
Wallis, J. J. and Weingast, B. R. (2008), ‘Dysfunctional or Optimal Institutions? State Debt Limitations, the Structure of State and Local Governments, and the Finance of American Infrastructure’, in Garrett, E., Graddy, E. and Jackson, H. (eds) Fiscal Challenges: An Interdisciplinary Approach to Budget Policy, Cambridge, MA: Cambridge University.Google Scholar
Wallis, J. J., Sylla, R. E. and Grinath, A. (2004), ‘Sovereign Debt and Repudiation: The Emerging Market Debt Crisis in the US States, 1839–1843’, NBER Working Papers Series, W-10753.Google Scholar
Weingast, B. R. (1993), ‘Constitutions as Governance Structures: The Political Foundations of Secure Markets’, Journal of Institutional and Theoretical Economics, 149(1): 286–311.Google Scholar
Weingast, B. R. (1995), ‘The Economic Role of Political Institutions: Market-preserving Federalism and Economic Growth’, Journal of Law, Economics, and Organization, 11(1): 1–31.Google Scholar
Weingast, B. R. (1997), ‘The Political Foundations of Democracy and the Rule of Law’, American Political Science Review, 91(2): 245–263.Google Scholar
Weingast, B. R. (2005), ‘The Constitutional Dilemma of Economic Liberty’, Journal of Economic Perspectives, 19(3): 98–108.Google Scholar
Young, E. (2008), ‘Constitutive and Entrenchment Functions of Constitutions: A Research Agenda. University of Pennsylvania Journal of Constitutional Law, 10(2): 399–411.Google Scholar
Young, A. T. (2019), ‘The Carolingians, the Church, and the Medieval Constitution’, Social Science Journal (forthcoming).Google Scholar