Menzies, Gordon2015-12-132015-12-130165-1765http://hdl.handle.net/1885/81062The rationale for debt relief (J. Dev. Econ. 29 (1988) 253) is second best. In a first-best ontract, a debtor who clears a (partly forgiven) debt receives an additional payment from the creditor, called a hyper-incentive .Keywords: Debt forgiveness; Debt overhang; Hyper-incentive contract200410.1016/j.econlet.2003.07.0092015-12-11