Sovereign debt default is an often catastrophic form of economic crisis that can affect the entire global economy. The IMF predicts that, in the coming years, over 50 countries are at risk of default. Yet, we understand little about the political determinants of this decision to renege on promises to international creditors. This book develops and tests the first unified theory of how domestic politics explains sovereign default across dictatorships and democracies. I argue that both democratic and autocratic governments will default when doing so is necessary for their political survival; however, regime type has a significant impact on what specific kinds of threats leaders face. While dictatorships are concerned with avoiding urban riots, democratic governments are concerned with losing elections, in particular the support of rural voting blocs. Using cross-national data and historical case studies, I show that leaders under each regime type are more likely to default when doing so allows them to keep funding costly policies supporting critical bases of support. These insights into the political determinants of sovereign default will be of interest to scholars of fiscal crises, the effects of institutions on political survival, urban-rural political divides, as well as the crucial intervening role of global markets on domestic political strategies.
Cameron Ballard-Rosa (2016) "Hungry for Change: Urban Bias and Autocratic Sovereign Debt Default." International Organization, 70(02), 313-346.
What drives autocrats to default on their sovereign debt? This paper develops the first theory of sovereign debt default in autocracies that explicitly investigates survival incentives of political actors in non-democracies. I argue that self-interested elites, fearful of threats to their tenure due to urban unrest, may be willing to endure the long-term borrowing costs that defaulting creates rather than risk the short-term survival costs of removing cheap food policies for urban consumers. I test my main claims that both urbanization and food imports should be associated with greater likelihood of autocratic default using panel data covering 43 countries over 50 years, finding that autocracies that are more reliant on imported food and that are more urbanized are significantly more likely to be in default on their external sovereign debt. I substantiate the mechanisms put forward in my formal theory through illustrative historical cases of sovereign debt default in Zambia and Peru, in which I demonstrate that fear of urban unrest in the face of rapidly increasing food prices does indeed drive autocratic elites to default on international debt obligations. In addition to providing the first political theory of debt default in autocracies, the paper introduces two robust predictors of autocratic default which have been overlooked in previous work, and in so doing highlights the importance of urban-rural dynamics in non-democratic regimes.
Selected as runner-up for the David A. Lake Award for Best Paper Presented at IPES, 2013
Cameron Ballard-Rosa, Lucy Martin and Kenneth Scheve (2017) "The Structure of American Tax Policy Preferences." The Journal of Politics 79(1), 1-16.
Modern income tax systems are multidimensional in that different rates can be applied to different income levels. Few contemporary studies of public preferences over the income tax or redistribution more generally measure policy preferences across the income distribution and none base those estimates on experimental evidence that accounts for revenue constraints. This paper implements an experimental conjoint survey design to measure income tax preferences across the income distribution. We find that policy opinions are generally progressive but that there is an important asymmetry in the elasticity of these preferences. Support for income tax plans is elastic with respect to policies for low income citizens with support decreasing significantly with higher rates on low incomes. In contrast, support for income tax plans increases---although relatively inelastically---with respect to higher taxes for high income citizens. Although individuals support tax plans with rates on high incomes that are higher than the low rates preferred for the poor, they are indifferent across a wide range of these high rates which yield very different degrees of progressivity. We also evaluate the correlates of these preferences to determine whether examining the multi-dimensionality of redistributive policy instruments provides new insights about political conflict over redistribution. We present evidence that income tax preferences are correlated with measures of self-interest, beliefs about the efficiency costs of taxes and the determinants of income, religiosity, and racial attitudes and find that political conflict over taxation is primarily over taxing high incomes.
Cameron Ballard-Rosa, Allison Sovey Carnegie and Nikhar Gaikwad (2018) "Economic Crises and Trade Liberalization." British Journal of Political Science, 48(3), 713-748.
Some scholars argue that economic crises lead to trade protection, whereas others maintain that crises trigger liberalization. This paper presents a theory that unifies both accounts by explicating how crises impact industries' resource endowments, which influences incentives to lobby and counter-lobby over trade policies. We develop a formal model that generates predictions about how industries repond to shocks of different durations and sizes. In particular, we predict an inverted U-shaped relationship between economic crises and industry demands for trade protection over time. Protection initially increases when industries lobby heavily for assistance, but then decreases as industries run low on resources to expend on lobbying and as firms in other industries mobilize to counter-lobby and demand liberalization. This inverted U-shaped relationship between crises and trade protection also depends on the size of the shocks. Bigger shocks increase lobbying activity until shocks become so large that industries have few resources left to expend on lobbying and as counter-lobbying prevails. We evaluate the model's predictions empirically using both sub-national and cross-national industry-level trade policy responses to economic shocks. Additionally, we present illustrative real-world examples to highlight the mechanisms driving our results.
MEDIA COVERAGE: The Tobin Project
Cameron Ballard-Rosa, Layna Mosley and Rachel Wellhausen (2021) "Contingent Advantage? Sovereign Borrowing, Democratic Institutions, and Global Capital Cycles" British Journal of Political Science 51(1). Cambridge University Press: 353-73.
How do domestic and global factors shape governments' capacity to issue debt in primary capital markets? Consistent with the "democratic advantage," we identify domestic institutional mechanisms, including executive constraints and policy transparency, that facilitate debt issuance. We suggest further that borrowing in primary markets is not systematically affected by electoral events. And, most important, we argue that the democratic advantage is contingent: investors' attention to domestic politics varies with conditions in global capital markets. When global financial liquidity is low, investors are risk-averse, and political risk constrains governments' capacity to borrow. But when global markets are flush, investors are risk-tolerant and less sensitive to political risk. We support our argument with new data on government bond issues in primary capital markets---the point at which governments' costs of market access matter most---for 131 sovereign issuers (1990-2016). In doing so, we highlight the role of systemic factors, which are under-appreciated in much "open economy politics" research, in determining access to capital markets.
Cameron Ballard-Rosa, Mashail Malik, Stephanie Rickard and Kenneth Scheve (2021) "The Economic Origins of Authoritarian Values: Evidence from Local Trade Shocks in Great Britain" Comparative Political Studies 54(13): 2321-2353.
Authoritarian values have long been thought to be an important determinant of political behavior. Explanations for why some individuals have more authoritarian values than others have focused on various processes of socialization, security threats, and economic conflict. We argue that negative economic shocks cause the adoption of authoritarian values through a frustration-aggression mechanism. Large economic shocks hinder individuals' expected attainment of their goals as economic providers and consumers and this interference increases generalized aggression. Employing an original 2017 survey representative of the British population, this paper uses local trade shocks to estimate the causal impact of economic change on authoritarian values. We find that individuals living in regions with affected local labor markets have significantly more authoritarian values. We show that this relationship is driven by the effect of the economic shock on authoritarian aggression and not other dimensions of authoritarianism such as submission or conventionalism.
Winner of the David A. Lake Award for Best Paper Presented at IPES, 2018
Cameron Ballard-Rosa, Amalie Jensen, and Kenneth Scheve (2022) "Economic Decline, Social Identity, and Authoritarian Values in the United States" International Studies Quarterly 66(1): sqab027.
Why does the contemporary backlash against globalization in the United States have such a substantial authoritarian character? We argue that sustained economic decline has a negative effect on the social identity of historically dominant groups. These losses lead individuals to be more likely to want to enforce social norm conformity---that is, adopt more authoritarian values---as a way to preserve social status and this effect is greater the larger the size of other groups in the population. Central to our account is the expectation of an interactive effect of local economic and demographic conditions in forging value responses to economic decline. The paper evaluates this argument using an original 2017 representative survey in the United States. We find that individuals living in relatively diverse regions in which local labor markets were more substantially affected by imports from China have more authoritarian values. We further find that the greater effect of globalization-induced labor market decline in more diverse areas is also evident for vote choice in the 2016 Presidential election.
Cameron Ballard-Rosa, Layna Mosley, and Rachel Wellhausen (2022) "Coming to Terms: The Politics of Sovereign Bond Denomination" International Organization 76 (1). Cambridge University Press: 32-69.
As deepening international markets expand developing countries' access to bond-based sovereign debt, their governments confront the question of how to structure the terms of their bonds, especially whether they are in domestic or foreign currency. Governments with left economic ideologies strongly prefer borrowing in domestic currency, which offers monetary policy autonomy and insulation from the effects of currency depreciation. Yet the longstanding "original sin'' expectation has been that investors will not accept developing country sovereign bonds in domestic currencies. Our new data on the terms of 240,000 primary bond issues by 131 countries (1990-2016) demonstrates that this expectation is incorrect: domestic currency sovereign bonds dominate. Even within this remarkable overall pattern, we demonstrate that left governments are consistently more likely to issue bonds in domestic currency, while right governments are not. Domestic politics underpins the unexpected diversity of developing country currencies at play in bond-based sovereign debt.
Cameron Ballard-Rosa, Bryan Schonfeld, and Allison Sovey Carnegie (2023) "The Geography of Democratic Discontent" British Journal of Political Science 53(2). Cambridge University Press: 366-386.
Understanding the determinants of support for democracy remains at the heart of many puzzles in international and comparative political economy. A central but still unresolved topic in this literature is the conditions under which such support breaks down. To answer this question, this paper focuses on distributional politics, arguing that governments often face a key political trade-off: whether to direct resources to the agricultural sector or to encourage urban manufacturing and development. Since democratic leaders possess limited budgets but need to win elections, they often skew resources towards electorally-pivotal groups, leading to more negative attitudes toward democracy among neglected sectors. After developing this argument in a formal model, we detail historical accounts of democratic breakdown in Turkey and Thailand that substantiate the primary mechanisms identified by the model. Finally, we provide cross-national quantitative support for the claim that discontent with democracy increases among urban populations when governments distribute resources towards the rural sector instead, even to the point of increasing support for military coups.
Cameron Ballard-Rosa, Judith Goldstein and Nita Rudra (2024) "Trade as Villain: The Fading American Dream and Declining Support for Globalization" Journal of Politics 86(1). University of Chicago Press: 274-290.
Why has commercial policy re-emerged as a source of division among the voting public? Drawing on existing literatures in political science and behavioral economics, we argue that job insecurity, wage stagnation and growing inequality have resulted in a deep pessimism about future mobility and a widespread loss of confidence in what we call the “American dream.” This pessimism has created a receptive audience for bipartisan elite messages linking trade policy to this decline in intergenerational mobility. In particular, groups that hold strong ideological commitments to meritocracy and concerned about their own mobility are the most sensitive to these cues on the costs of globalization. To evaluate our argument, we draw upon a large, original panel data set with repeat-observations of the same individual respondents, as well as data from several survey experiments. We find that individuals who are most tied to the myth of an American Dream, that is, who believe in meritocracy, and are anxious about their prospective mobility are the most likely to respond to these anti-trade elite cues.
Cameron Ballard-Rosa (2016) Review of Rethinking Sovereign Debt: Politics, Reputation, and Legitimacy in Modern Finance by Odette Lienau. Perspectives on Politics, 14(01), 284-286.
Inequality has increased over recent decades in many advanced industrial democracies, but taxes have rarely become more progressive. One possible explanation for the lack of a policy response is that, despite rising inequality, voters support higher taxes on incomes and wealth weakly, if at all. Using original representative surveys in Austria and Germany, we employ two strategies to elicit (a) voters' preferences over the progressivity of tax policy and (b) whether exposing them to accurate information about inequality affects those preferences. Voters, we find first, express an abstract preference for progressivity but concretely support tax plans only slightly more progressive than the status quo. Second, we find little evidence that, in either Austria or Germany, informing subjects about aggregate inequality or their own place in the income distribution significantly affects support for progressive taxation. While it seems likely that muted preferences for redistribution help explain why countries have not countered rising inequality with more progressive tax policies, low information does little on the whole to explain those preferences.
Student debt has skyrocketed over the past twenty years. Repayment of such debt is regularly identified as a significant source of stress in the popular press, suggesting that it is an issue directly affecting material well-being in a straightforward and apparent manner. Such topics should be central to the political economy of redistributive preferences, yet no work currently exists that investigates the political ramifications of student debt burdens. This paper presents a new theory highlighting two critical theoretical differences between student loans and other forms of personal debt: specifically, the non-tangibility of student loans, combined with the difficulty of expunging education debt in default, means that individuals are much more likely to view such loans as a burden during periods of unemployment or low earnings, thereby increasing demands for government labor market protection programs. This paper then demonstrates empirical support for my core hypotheses from the first national survey including measures of both individual student loans as well as a number of redistributive policy areas. Importantly, the paper demonstrates that---consistent with my theoretical account---student loans do not lead to a monotonic increase in all progressive views, but are instead associated with government programs meant to more narrowly help individuals facing labor market trouble.
How does the presence of new and diverse creditors affect the occurrence of sovereign debt restructurings? We posit that China's presence as a creditor renders Paris Club (bilateral official) restructurings less likely. This occurs, in part, because China offers an alternative source of credit, providing more fiscal space to countries in distress. Geopolitical rivalries and failure to coordinate burden sharing between China and Paris Club members heighten this effect: countries that are less aligned with the United States, and those who have yet to reschedule Chinese debts, are even less likely to experience a Paris Club restructuring. Moreover, this pattern is most evident for countries with higher levels of transparency, allowing other creditors an awareness of their borrowing relationships and fiscal policy. We test, and find support for, these expectations using data for the 2000-2017. We also find no evidence that the presence of China as a creditor during this period is related to the completion of private debt restructurings.
While outsourcing of production and tax avoidance allow multinational corporations to seek low-cost locations for doing business in a globalized economy, we argue that these strategies may also violate important norms of fair behavior for corporations to contribute to their host countries, particularly among more populist or more nationalist citizens. We demonstrate causal support for our primary hypotheses through a series of original survey experiments administered on a nationally representative sample of U.S. respondents. We find that tax avoidance by MNCs corresponds to significantly increased preferences for corporate income taxes, especially among populists. Surprisingly, however, while outsourcing by firms also generally leads to higher preferences for corporate taxes, we do not find that this effect is more pronounced among nationalist respondents. These results speak to the importance of separating out populist from nationalist political movements, and also identify an electorally-salient framing of corporate income taxes that has cross-partisan appeal.
Cameron Ballard-Rosa, Stephanie Rickard and Kenneth Scheve (2018) "Liberal Populism: Public Support for Globalization in Post-Brexit United Kingdom"
Alper, Kaitlin and Cameron Ballard-Rosa (2021) "Rising Education Debt in Europe."
Cameron Ballard-Rosa, Layna Mosley and Peter Rosendorff (2022) "Sunlight Cures all (Currency) Ills"
Cameron Ballard-Rosa and Lucy Martin (2023) "Mass Preferences over Sovereign Debt"