When lack of accountability allows observing unobservables: moral hazard in sub-national government credit markets in Mexico

摘要

This article estimates the amount of moral hazard effect in sub-national credit markets. I employ the case of Mexico because of the country's lack of political accountability; a fact that I argue allows for observation of this informational problem. In particular, out of every dollar borrowed, sub-national governments spend 45 cents in activities unrelated to the purpose of credit.