 Capitalists, workers, and the burden of debtReview of Political Economy, 2006, vol. 18, issue 4, 449-467 Abstract: This paper analyzes the burden of debt in a growth model that combines overlapping generations of workers who save for life-cycle reasons and dynastic agents who save for bequest reasons ('capitalists'). Ricardian Equivalence prevails, but capitalists regard the debt serviced out of taxes on workers as net wealth. In the long run, the Cambridge Theorem holds: the relationship between the rate of profit and rate of growth is determined by the capitalist saving function, independently of worker or government saving. Two alternative closures are considered. Under exogenous growth constrained by a fully employed labor force, debt and deficits result in temporary effects on the distribution of income but permanent effects on the distribution of wealth. Under endogenous growth constrained by a fully utilized capital stock, debt and deficits result in temporary effects on the growth rates of the components of wealth and permanent effects on the level and distribution of capital. Date: 2006 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:revpoe:v:18:y:2006:i:4:p:449-467 Ordering information: This journal article can be ordered from DOI: 10.1080/09538250600915626 Access Statistics for this article Review of Political Economy is currently edited by Steve Pressman and Louis-Philippe Rochon More articles in Review of Political Economy from Taylor & Francis Journals |
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