US State Constitutional Entrenchment and Default in the Nineteenth Century

Abstract

Constitutional scholars emphasize the importance of an enduring, stable constitutional order. North and Weingast (1989) argue that it consistent with credible commitments to sustainable fiscal policies. However, this view is controversial and has received little empirical study. We use nineteenth 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: Default, Debt, Fiscal Crisis, Constitutions, Credible Commitment, Entrenchment

JEL Classification: H12, H73, H74, N21