NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Debt Crisis: Structural Explanations of Country Performance

Andrew Berg, Jeffrey Sachs

NBER Working Paper No. 2607
Issued in June 1988
NBER Program(s):   ITI   IFM

This paper develops a cross-country statistical model of debt rescheduling, and the secondary market valuation of LDC debt, which links these variables to key structural characteristics of developing countries, such as the trade regime, the degree of income inequality, and the share of agriculture in GNP Our most striking finding is that higher income inequality is a significant predictor of a-higher probability of debt rescheduling in a cross-section of middle-income countries. We attribute this correlation to various difficulties of political management in economies with extreme inequality. We also find that outward-orientation of the trade regime is a significant predictor of a reduced probability of debt rescheduling.

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Document Object Identifier (DOI): 10.3386/w2607

Published: Journal of Development Economics 29 1988, 271-306translation in Trimestre Economica Vol. LVI, July 1989, Mexico citation courtesy of

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