Tightening the Belt: Sovereign Debt and Alliance Formation^*

Abstract

International relations scholars have previously argued that states facing budget constraints will join alliances to free resources for domestic spending. In this paper, we focus on the primary mechanism by which leaders have relaxed this constraint: sovereign borrowing. Sovereign debt enables states to maintain stable tax rates while increasing expenditures to confront budgetary emergencies. Affordable access to credit, then, serves as both a source of power and an important buffer between security and the political consequences of fiscal policy. States that lack the confidence of investors must make tough choices between continued security and their electoral fortunes. We suggest that as governments lack access to affordable credit, they will substitute military capacity with alliance formation. Alliances provide a means for leaders to offset the loss of flexibility from diminished access to credit without disturbing the domestic political economy. Using previous models of alliance formation as a guide, our empirical evidence indicates that states that have a hard time borrowing are more likely to form an alliance than those states with affordable access to credit markets.

Regions of Hierarchy and Security: US Troop Deployments, Spatial Relations, and Defense Burdens

“…To account for the trade-off between defense spending and domestic demands for spending on other social issues, we include the Infant Mortality Rate in a country. Previous studies suggest that the infant mortality rate acts as an exogenous pressure for social spending and allows us to control for a negative pressure on defense burdens (Abouharb and Kimball 2007;Allen and Digiuseppe 2013;Kimball 2010).…”

Factors Affecting Well-Being at the State Level in the United States

“…Although these surpluses would add funding to programs aimed at increasing well-being, including building up human capital via education and health or increasing employment via necessary repairing of aging infrastructure, conservative governors and legislators plan to use these surpluses to further reduce state income taxes on the rich and corporations. According to the findings from the empirical analyses presented here, specifically the weak role of increasing per capita income on the individual states' well-being, this type of policy would not raise general well-being for the state's population (Allen 2013). Rather, the findings presented here suggest that policies aimed at increasing equality would increase the well-being of citizens in each state, on average.…”

“…However, it has been reported recently that states are increasingly earning surpluses in their budget (Allen 2013) so allocating these funds for increasing equality as a social good could be well advised. Although these surpluses would add funding to programs aimed at increasing well-being, including building up human capital via education and health or increasing employment via necessary repairing of aging infrastructure, conservative governors and legislators plan to use these surpluses to further reduce state income taxes on the rich and corporations.…”

Borrowed Time: Sovereign Finance, Regime Type, and Leader Survival

“…12 11 We demonstrate that our results are robust to the original ARCHIGOS coding in the Appendix S1. 12 Researchers in both economics and political science have often employed the II ratings to capture sovereign credit risk in empirical analyses (Ahlquist, 2006;Allen and DiGiuseppe, 2013;DiGiuseppe et al, 2012;Reinhart and Rogoff, 2008;Rose, 2005) The II measure holds several advantages over the well-known letter-grade ratings published by credit rating agencies such as Standard & Poor's. First, the measure has greater cross-sectional coverage and diversity.…”