Sustainability of the public debt and wealth inequality in a general equilibrium model

Noritaka Maebayashi and Kunihikoi Konishi ()
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Kunihikoi Konishi: Institute of Economic Research, Kyoto University

No 16-33, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study investigates the correlation between sustainability of the public debt and wealth inequality in an endogenous growth model with heterogeneous agents. We show that the threshold for the sustainability of public debt can be related to not only relative size of public debt but also wealth inequality. In addition, this study examines the effects of budget deficit and redistributive policies on the sustainability of the public debt and wealth inequality. We show that an increase in the deficit ratio or the redistributive tax makes the public debt less sustainable. If the economy falls into the unsustainable region as a result of the policy change, both public debt and wealth inequality continue to increase.

Keywords: Fiscal sustainability; Public debt; Wealth inequality; Redistributive policy; Endogenous growth (search for similar items in EconPapers)
JEL-codes: H62 H63 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-12
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (2)

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