The Incidence and Effects of Public Debt in the Absence of Fiscal Illusion

James Buchanan and Jennifer Roback

Public Finance Review, 1987, vol. 15, issue 1, 5-25

Abstract: This article clarifies several points concerning the effects of public debt. First, the article clarifies the distinction between the Ricardian equivalence and Barro neutrality theorems. Second, the article develops a voting model with two types of families, neither of whom have fiscal illusion. We show that debt may have redistributive consequences and that some voters will rationally prefer debt to taxes. In this way, we develop a rudimentary positive theory of debt issue. We also verify the proposition that debt issues that redistribute income are not neutral with respect to savings and consumption.

Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:15:y:1987:i:1:p:5-25

DOI: 10.1177/109114218701500101

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