Abstract
This paper relates democracy, public and private international capital flows, and odious debt. Democracy commits a ruler to pass borrowed funds on to the private sector which builds the country’s international collateral, and the consequent rise in the credit ceiling is a Pareto-improvement up to a point because the ruler can appropriate a smaller share of rising loan. However, the ruler may still impose odious debt in the sense that the private sector prefers the country to borrow less. Under conditions, a fall in the world interest rate or a rise in productivity growth increases the optimal levels of democracy, borrowing, investment, and welfare. I offer suggestive evidence from a global panel.Read full paper here

Thorsten Janusa,Department of Economics and Finance, University of Wyoming, Laramie, Wyoming, USA, Revised May 19, 2008