Incentive to Sovereign Debt Default in a Small Open Economy with International Labor Outflows Supervisor; Mauro Sodini

Over the last few years, the sovereign debt crisis in Puerto Rico has associated with a large number of international labor outflows. To formalize these facts, I develop a simple model by modifying the endowment model of sovereign debt (Eaton and Gersovitz 1981) to explain how sovereign debt crisis can be affected by international labor outflows. The result shows that given a level of output, higher stock of the labor outflows, higher probability of sovereign debt default.