Intergenerational Politics, Government Debt, and Economic Growth

Tetsuo Ono

No 14-23-Rev., Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study presents a two-period overlapping-generations model featuring en- dogenous growth and intergenerational conflict over fiscal policy. In particular, we characterize a Markov-perfect political equilibrium of the voting game between gen- erations, and show the following results. First, population aging incentivizes the government to invest more in capital for future public spending, and thus produces a positive effect on economic growth. Second, when the government finances its spending by issuing bonds, an introduction of a balanced budget rule results in a higher growth rate. Third, to obtain a normative implication of the political equi- librium, we compare it to an allocation chosen by a benevolent planner who takes care of all future generations. Here, we show that the political equilibrium attains a lower growth rate than that in the planner's allocation.

Keywords: Economic Growth; Government Debt; Overlapping Generations; Pop- ulation Aging; Voting (search for similar items in EconPapers)
JEL-codes: D72 D91 H63 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014-06, Revised 2015-01
New Economics Papers: this item is included in nep-age, nep-cdm, nep-dge, nep-fdg, nep-gro, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Intergenerational Politics, Government Debt, and Economic Growth (2015)
Working Paper: Intergenerational Politics, Government Debt and Economic Growth (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1423r

Access Statistics for this paper

More papers in Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by The Economic Society of Osaka University ().