[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/40505.html
   My bibliography  Save this paper

Borrowed Power: Debt Finance and the Resort to Arms

Author

Listed:
  • Slantchev, Branislav
Abstract
Military expenditures are often funded by debt, and sovereign borrowers are more likely to renege on debt-service obligations if they lose a war than if they win one or if peace prevails. This makes expected debt service costlier in peace, which can affect both crisis bargaining and war termination. I analyze a complete-information model where players negotiate in the shadow of power, whose distribution depends on their mobilization levels, which can be funded partially by borrowing. I show that players can incur debts that are unsustainable in peace because the opponent is unwilling to grant the concessions necessary to service them without fighting. This explanation for war is not driven by commitment problems or informational asymmetries but by the debt-induced inefficiency of peace relative to war. War results from actions that eliminate the bargaining range rather than from inability to locate mutually acceptable deals in that range.

Suggested Citation

  • Slantchev, Branislav, 2009. "Borrowed Power: Debt Finance and the Resort to Arms," MPRA Paper 40505, University Library of Munich, Germany, revised 24 Jul 2012.
    • Handle: RePEc:pra:mprapa:40505
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/40505/1/MPRA_paper_40505.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Broadberry,Stephen & Harrison,Mark (ed.), 2005. "The Economics of World War I," Cambridge Books, Cambridge University Press, number 9780521852128, September.
    2. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    3. Bahar Leventoğlu & Branislav L. Slantchev, 2007. "The Armed Peace: A Punctuated Equilibrium Theory of War," American Journal of Political Science, John Wiley & Sons, vol. 51(4), pages 755-771, October.
    4. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 2, chapter 22, pages 649-709, Elsevier.
    5. Michael D. Bordo & Eugene N. White, 1990. "British and French Finance During the Napoleonic Wars," NBER Working Papers 3517, National Bureau of Economic Research, Inc.
    6. Branislav L. Slantchev & Ahmer Tarar, 2011. "Mutual Optimism as a Rationalist Explanation of War," American Journal of Political Science, John Wiley & Sons, vol. 55(1), pages 135-148, January.
    7. Garfinkel, M.R. & Skaperdas, S., 2000. "Conflict without Misperceptions or Incomplete Information: how the Future Matters," Papers 99-00-11, California Irvine - School of Social Sciences.
    8. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(3), pages 379-414, July.
    9. Bordo, Michael D. & White, Eugene N., 1991. "A Tale of Two Currencies: British and French Finance During the Napoleonic Wars," The Journal of Economic History, Cambridge University Press, vol. 51(2), pages 303-316, June.
    10. Moore, Lyndon & Kaluzny, Jakub, 2005. "Regime change and debt default: the case of Russia, Austro-Hungary, and the Ottoman empire following World War One," Explorations in Economic History, Elsevier, vol. 42(2), pages 237-258, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gustavo A. Flores-Macías & Sarah E. Kreps, 2017. "Borrowing Support for War: The Effect of War Finance on Public Attitudes toward Conflict," Journal of Conflict Resolution, Peace Science Society (International), vol. 61(5), pages 997-1020, May.
    2. McDougal, Topher & Caruso, Raul, 2013. "Wartime Violence and Post-Conflict Development Policy: The Case of Agricultural Concessions in Mozambique," NEPS Working Papers 1/2013, Network of European Peace Scientists.
    3. Patrick E. Shea & Paul Poast, 2018. "War and Default," Journal of Conflict Resolution, Peace Science Society (International), vol. 62(9), pages 1876-1904, October.
    4. Vesperoni , Alberto, 2013. "War Finance and the Modern State," NEPS Working Papers 6/2013, Network of European Peace Scientists.
    5. Douglas Kriner & Breanna Lechase & Rosella Cappella Zielinski, 2018. "Self-interest, partisanship, and the conditional influence of taxation on support for war in the USA," Conflict Management and Peace Science, Peace Science Society (International), vol. 35(1), pages 43-64, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michelle R. Garfinkel, 2010. "Political Institutions and War Initiation: The Democratic Peace Hypothesis Revisited," Working Papers 101107, University of California-Irvine, Department of Economics.
    2. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(6), pages 657-676.
    3. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 2, chapter 22, pages 649-709, Elsevier.
    4. Christopher Blattman & Edward Miguel, 2010. "Civil War," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 3-57, March.
    5. Eoin F. McGuirk & Nathaniel Hilger & Nicholas Miller, 2023. "No Kin in the Game: Moral Hazard and War in the US Congress," Journal of Political Economy, University of Chicago Press, vol. 131(9), pages 2370-2401.
    6. Vahabi,Mehrdad, 2019. "The Political Economy of Predation," Cambridge Books, Cambridge University Press, number 9781107591370.
    7. Kai A. Konrad & Florian Morath, 2016. "Evolutionary determinants of war," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(4), pages 520-534, August.
    8. Long, Iain W., 2015. "Better feared than loved: Reputations and the motives for conflict," Journal of Economic Behavior & Organization, Elsevier, vol. 114(C), pages 46-61.
    9. Christopher Blattman, 2009. "Civil War: A Review of Fifty Years of Research," Working Papers id:2231, eSocialSciences.
    10. Eric Min, 2021. "Interstate War Battle dataset (1823–2003)," Journal of Peace Research, Peace Research Institute Oslo, vol. 58(2), pages 294-303, March.
    11. Stergios Skaperdas, 2008. "An economic approach to analyzing civil wars," Economics of Governance, Springer, vol. 9(1), pages 25-44, January.
    12. Blouin, Max & Pallage, Stéphane, 2016. "Warlords, famine and food aid: Who fights, who starves?," European Journal of Political Economy, Elsevier, vol. 45(C), pages 18-38.
    13. Mehrdad Vahabi, 2012. "Political Economy of Conflict Foreword," Revue d'économie politique, Dalloz, vol. 122(2), pages 153-169.
    14. Michael D. Bordo & Finn E. Kydland, 1990. "The Gold Standard as a Rule," NBER Working Papers 3367, National Bureau of Economic Research, Inc.
    15. Broz, J. Lawrence & Grossman, Richard S., 2004. "Paying for privilege: the political economy of Bank of England charters, 1694-1844," Explorations in Economic History, Elsevier, vol. 41(1), pages 48-72, January.
    16. Chang, Yang-Ming & Sanders, Shane & Walia, Bhavneet, 2015. "The costs of conflict: A choice-theoretic, equilibrium analysis," Economics Letters, Elsevier, vol. 131(C), pages 62-65.
    17. Garfinkel, Michelle R. & Syropoulos, Constantinos, 2021. "Self-enforcing peace agreements that preserve the status quo," Games and Economic Behavior, Elsevier, vol. 130(C), pages 148-178.
    18. Charles H. Anderton & John R. Carter, 2011. "A Bargaining Theory Perspective on War," Chapters, in: Derek L. Braddon & Keith Hartley (ed.), Handbook on the Economics of Conflict, chapter 3, Edward Elgar Publishing.
    19. Akos Lada, 2013. "Clash of Brothers in a Contagious World: Wars to Avoid Diffusion," CERS-IE WORKING PAPERS 1333, Institute of Economics, Centre for Economic and Regional Studies.
    20. Richard Barrett & Somnath Sen, 2009. "Rational Defence: War and Peace in South Asia," Discussion Papers 09-11, Department of Economics, University of Birmingham.

    More about this item

    Keywords

    crisis bargaining; conflict inefficiency; endogenous distribution of power; military debt;
    All these keywords.

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:40505. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.