"We show how to decentralize constrained efficient allocations that arise from enforcement constraints between sovereign nations.In a pure exchange economy, these allocations can be decentralized with private agents acting competitively and taking as given government default decisions on foreign...

This paper is structured in three parts. The first part outlines the methodological steps, involving both theoretical and empirical work, for assessing whether an observed allocation of resources across countries is efficient. The second part applies the methodology to the long-run allocation of...

We explore the welfare consequences of different taxation schemes in an economy where agents are debt-constrained. If agents default on their debt, they are banned from future intertemporal trade, but retain their private (labor) endowments which are subject to income taxation. We impose...