Political Economy of Taxation, Debt Ceilings, and Growth

Yuki Uchida and Tetsuo Ono

MPRA Paper from University Library of Munich, Germany

Abstract: This study presents voting on policies including public education, taxes, and public debt in an overlapping-generations model with physical and human capital accumulation and analyzes the effects of a debt ceiling on the government's policy formation and its impact on growth and welfare. The debt ceiling induces the government to shift the tax burdens from the older to younger generations and increase public education spending, resulting in a higher growth rate. However, it creates a trade-off between generations in terms of welfare. Alternatively, the debt ceiling is measured from the viewpoint of a benevolent planner; lowering the debt ceiling makes it possible for the government to approach the planner's allocation in an aging society.

Keywords: Debt ceiling; Probabilistic voting, Public debt, Economic growth, Overlapping generations (search for similar items in EconPapers)
JEL-codes: D70 E24 H63 (search for similar items in EconPapers)
Date: 2019-07-15
New Economics Papers: this item is included in nep-dge, nep-mac, nep-pbe and nep-pol
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https://mpra.ub.uni-muenchen.de/95134/1/MPRA_paper_95134.pdf original version (application/pdf)

Related works:
Journal Article: Political economy of taxation, debt ceilings, and growth (2021)
Working Paper: Political Economy of Taxation, Debt Ceilings, and Growth (2020)
Working Paper: Political Economy of Taxation, Debt Ceilings, and Growth (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:95134

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