Inequality and Public Debt: A Positive Analysis

Ryo Arawatari and Tetsuo Ono

No 15-01-Rev., Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study extends the multi-country, politico-economic model of fiscal policy developed by Song, Storesletten, and Zilibotti (2012) to incorporate wage inequal- ity within each country. In this extended framework, we present conflict over fiscal policy within and across generations and show that a low-inequality country real- izes tight fiscal policy with low public debt accumulation, whereas a high-inequality country experiences loose fiscal policy with high public debt. This model predic- tion is consistent with empirical evidence from OECD countries for the past three decades.

Keywords: scal policy; inequality; probabilistic voting; public debt; small openeconomies. (search for similar items in EconPapers)
JEL-codes: D72 E62 F34 H41 H60 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2015-01, Revised 2015-09
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Inequality and public debt: A positive analysis (2017)
Working Paper: Inequality and Public Debt: A Positive Analysis (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1501r

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