Wharton author: Mauro Guillen [with Doğa Kerestecioğlu, Univ. of Pennsylvania]
This paper analyzes the effects of the global network structure of states on sovereign debt defaults. Following the institutionalism, world-system, and world-society perspectives in sociology, we posit that economic events are embedded in the social sphere and how states perceive others will affect their behavior. After building mapping our sample of countries on two separate networks based on two different types of trade ties, we test whether high volume trade partner states or competing states are more likely to default compared to other trade pairs. We also test whether partnership effect changes at different levels of democracy. We test our hypotheses with data on 64 countries between 1962 and 2000, using fixed effects logistic regression and multilevel logistic regression models. Controlling for macroeconomic and political economy variables, we find strong support that role equivalency increases the likelihood of sovereign default spillovers. The results reveal mixed findings about trade cohesion and the effects of democracy.