 Testing Ricardian Equivalence under UncertaintyStephen Slate, Michael McKee, William Beck and James Alm () Public Choice, 1995, vol. 85, issue 1-2, 29 pages Abstract: This paper uses experimental methods to analyze Ricardian equivalence when the probability of debt retirement is less than one. The results suggest that the presence of outstanding debt and the probability of debt retirement have a strong influence on savings behavior. When the probability of debt retirement is low, consumption by the current generation increases, as predicted by Keynesian theory. However, as the probability of debt retirement increases, bequests rise to offset the future generation's expected repayment liability, and deficit spending becomes much less expansionary, as predicted by Ricardian theory. In general, the average bequest is significantly larger when an outstanding debt is passed on to the next generation than when no debt exists, regardless of the probability of debt retirement. However, as long as there is some uncertainty about debt repayment, the presence of debt always stimulates some additional consumption, so that strong variants of Ricardian equivalence are not found. Coauthors are Michael McKee, William Beck, and James Alm. Copyright 1995 by Kluwer Academic Publishers Date: 1995 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:85:y:1995:i:1-2:p:11-29 Ordering information: This journal article can be ordered from Access Statistics for this article Public Choice is currently edited by WIlliam F. Shughart II More articles in Public Choice from Springer |
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