Government Debt

Toshihiro Ihori
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Toshihiro Ihori: University of Tokyo

Chapter 9 in Public Finance in an Overlapping Generations Economy, 1996, pp 198-224 from Palgrave Macmillan

Abstract: Abstract In Chapter 9 we introduce government debt into the basic model. We first show that the tax-financed transfer payments and Diamond’s debt have the same effect on the long-run equilibrium. We also show that if lump-sum taxes are appropriately adjusted, debt policy is not effective and hence the government deficit is a meaningless policy indicator. We then examine the burden of debt and show that an increase in a constant amount of government debt per worker will crowd out capital accumulation in the long run. Section 2 also analyzes economic activities of government by introducing government capital.

Keywords: Public Good; Fiscal Policy; Government Debt; Real Capital; Government Deficit (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-38990-8_9

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DOI: 10.1057/9780230389908_9

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