A Political Economy Theory of Government Debt and Social Security

Ryo Arawatari and Tetsuo Ono

No 11-33, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper analyzes the determinants of government debt and social security for the old in a closed-economy, overlapping-generation model. Under the probabilistic voting, the model presents (i) an intergenerational link of resource allocation via debt and social security; (ii) multiple political equilibria; and (iii) a negative cor- relation between tax and debt. These three results are robust to the introduction of public goods as an alternative government expenditure or to the introduction of income heterogeneity within a generation.

Keywords: Government debt; Social security; Overlapping generations; Proba- bilistic voting (search for similar items in EconPapers)
JEL-codes: D72 H55 H63 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2011-11
New Economics Papers: this item is included in nep-age, nep-dge, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1133

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