Skip to main content

Market-Oriented Subnational Debt Regimes: Empowering the Developing World to Construct Infrastructure

Posted by on Wednesday, June 6, 2012 in Notes, Vol. 45 No. 3.

Globally, as national governments continue to decentralize fiscal and governmental responsibility, the sound facilitation of subnational debt markets will play a critical role in the construction of infrastructure. However, sparse scholarship exploring the optimal legal and financial frameworks for encouraging the construction of infrastructure at the subnational level has left a number of open questions. This Note primarily provides a basic overview of subnational debt trends and policies. It first reviews subnational debt regimes, comparing market-oriented regimes with regimes with varying levels of involvement by central governments. Though not always possible, the Note concludes that market-driven incentives generally produce the best subnational debt regimes. Though it has faced some struggles historically, as the largest and most liquid subnational debt market in the world, the United States’ municipal bond framework can provide a useful model. The Note then presents a market-oriented proposal for U.S. policy makers. By extending tax-exempt status to the public debt instruments of select subnational entities abroad, the United States could provide a promising investment opportunity for U.S. financial institutions and citizens, facilitate the construction of infrastructure in some of the most desperate areas of the world, and encourage sound international municipal finance practices through the extension of a largely self-regulated system. This market-enabling tax exemption could prove to be far more effective than any sort of direct spending. Finally, the Note argues that a fluid and competitive subnational debt market in developing countries is in the best interest of both investors and humanitarians alike.


Leave a Response

ExpressO Top 10 Law Review


The Journal is pleased to announce its 2018-2019 Board of Editors. Complete-Masthead-2018-2019

Vanderbilt University Law School Professor Michael A. Newton’s 2016 VJTL Article entitled How the International Criminal Court Threatens Treaty Norms  was cited by the International Criminal Court prosecutor’s November 2017 filing seeking investigation into war crimes in Afghanistan.

May 2018 Issue on the Second Israel Defense Forces International Conference on the Law of Armed Conflict. Read more about the Journal’s May 2018 issue here.

Thank you to everyone who attended the Journal’s 50th Anniversary celebration on October 5, 2017! View photos from the event here and read about the Journal’s history here.

Connect with the Vanderbilt Journal of Transnational Law on LinkedIn.

The Journal is pleased to listed as the #5 International Law Journal by the 2017 Washington and Lee Law Journal Rankings.

The Journal is very excited about the success of our February 2017 Symposium, “Sovereign Conduct on the Margins of the Law.” Read more about our February 2017 Symposium here

Please join us in congratulating the Vanderbilt Journal of Transnational Law 2017-2018 Write-On Competition Winners.

Video is available from the Vanderbilt Journal of Transnational Law’s 2015-2016 SymposiumThis is Not a Drill: Confronting Legal Issues in the Wake of International Disasters. Watch here.