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The Welfare Effects of Debt: Crowding Out and Risk Shifting: Working Paper 2022-10

Michael Falkenheim

No 58849, Working Papers from Congressional Budget Office

Abstract: Government debt affects people’s welfare through two distinct channels: It crowds out capital, and it shifts risk from current to future generations. This study extends Olivier Blanchard’s 2019 analysis of the welfare effects of debt by decomposing his estimates into those two categories. Blanchard estimated the change in average utility under simulations of an overlapping generations model with and without a transfer of wealth from the younger to the older generation. This study decomposes those estimated welfare effects into crowding-out and risk- shifting components and

JEL-codes: E22 E23 E43 E62 H50 H63 (search for similar items in EconPapers)
Date: 2022-12-16
New Economics Papers: this item is included in nep-age, nep-dge and nep-upt
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Handle: RePEc:cbo:wpaper:58849