The Preference for Net Wealth

Jean-Baptiste Michau

No 2019-12, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper provides a definition of the preference for wealth such that households do not su¤er from any wealth illusion from the ownership of government bonds. People understand that public indebtedness will translate into future taxes. Each household is therefore assumed to own a share government liabilities equal to the future taxes that these liabilities will cause. A household's net wealth is defined as the sum its private wealth and of its own share of public liabilities. The preference for net wealth ensures that the Ricardian equivalence holds. The endogeneity of the ownership share through distortionary taxes is carefully investigated.

Keywords: Government debt; Preference for wealth; Ricardian equivalence. (search for similar items in EconPapers)
JEL-codes: D15 E21 E62 H63 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2019-07-29
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

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