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Government Debt

In: Public Finance in an Overlapping Generations Economy

Author

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  • Toshihiro Ihori

    (University of Tokyo)

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.

Suggested Citation

  • Toshihiro Ihori, 1996. "Government Debt," Palgrave Macmillan Books, in: Public Finance in an Overlapping Generations Economy, chapter 9, pages 198-224, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-38990-8_9
    DOI: 10.1057/9780230389908_9
    as

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