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Journal of Globalization and Development

Ed. by Stiglitz, Joseph / Emran, M. Shahe / Guzman, Martin / Jayadev, Arjun / Ocampo, José Antonio / Rodrik, Dani

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CiteScore 2017: 0.30

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Source Normalized Impact per Paper (SNIP) 2017: 0.519

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Deindustrialization and Unsustainable Debt in Middle-Income Countries: The Case of Puerto Rico

Jose Caraballo-Cueto
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  • University of Puerto Rico, Business Administration, 205, Calle Antonio R. Barceló, Cayey, Puerto Rico
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/ Juan Lara
Published Online: 2018-05-18 | DOI: https://doi.org/10.1515/jgd-2017-0009


Puerto Rico recently became the largest bankruptcy case in the history of the U.S. municipal bond market. This debt crisis has not been the subject of significant scrutiny in the economic literature, though many researchers focus on case studies, such as Greece and Argentina, to analyze a country’s indebtedness. The underlying economic factors that influence unsustainable debt in upper middle-income countries are generally understudied. We attempted to contribute to filling these gaps in the related literature. Using econometric analysis, we found that Puerto Rico’s government indebtedness is, to a large extent, connected to a sharp decrease in manufacturing employment (i.e. deindustrialization) suffered by this economy, and weak evidence that it was caused by an excessive government payroll or overgenerous federal programs. In light of our empirical results, we discussed how the consequences of deindustrialization ultimately led to increase government borrowing.

This article offers supplementary material which is provided at the end of the article.

Keywords: Deindustrialization; external debt; Puerto Rico

JEL Classification: E6; H6; R5; 02


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Published Online: 2018-05-18

Citation Information: Journal of Globalization and Development, Volume 8, Issue 2, 20170009, ISSN (Online) 1948-1837, DOI: https://doi.org/10.1515/jgd-2017-0009.

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