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dc.titleTax Revolts and Sovereign Defaults
dc.contributor.authorArce, Fernando
dc.contributor.authorMorgan, Jan
dc.contributor.authorWerquin, Nicolas
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.coverageArgentina
dc.date.available2025-06-09T00:06:00
dc.date.issue2025-06-09T00:06:00
dc.description.abstractPolitical crises often coincide with fiscal crises, with complex causal dynamics at play. We examine the interaction between tax revolts and sovereign risk using a quantitative structural model calibrated to Argentina. In the model, the government can be controlled by political parties with different preferences for redistribution. Households may opt to revolt in response to the fiscal decisions of the ruler. While revolts entail economic costs, they also increase the likelihood of political turnover. Our model mirrors the data by generating political crises concurrent with fiscal turmoil. Specifically, we find that our model aligns closely with the conditions observed during the Macri administration (2015-2019). We find that left-leaning parties are more prone to default upon entering office, while right-leaning parties issue more debt. Our framework explains the high deficits observed during the Macri administration as well as the sovereign default that occurred immediately after the left regained power.
dc.format.extent61
dc.identifier.doihttp://dx.doi.org/10.18235/0013572
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Tax-Revolts-and-Sovereign-Defaults.pdf
dc.language.isoen
dc.publisherInter-American Development Bank
dc.subjectFiscal Policy
dc.subjectEmployee Turnover
dc.subjectSovereign Default
dc.subjectCountry Risk
dc.subjectRating
dc.subjectTaxation
dc.subjectWage
dc.subjectProductivity
dc.subject.jelcodeE32 - Business Fluctuations • Cycles
dc.subject.jelcodeE44 - Financial Markets and the Macroeconomy
dc.subject.jelcodeF41 - Open Economy Macroeconomics
dc.subject.jelcodeG01 - Financial Crises
dc.subject.jelcodeG28 - Government Policy and Regulation
dc.subject.keywordsCivil unrest;Financial Crises;sovereign default;redistribution
idb.identifier.pubnumberIDB-WP-01719
idb.operationRG-K1098
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