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The Preference for Net Wealth

Author

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  • Jean-Baptiste MICHAU

    (CREST; Ecole Polytechnique.)

Abstract

This paper provides a definition of the preference for wealth such that households do not su¤er from any wealth illusion from the ownership of government bonds. People understand that public indebtedness will translate into future taxes. Each household is therefore assumed to own a share government liabilities equal to the future taxes that these liabilities will cause. A household's net wealth is defined as the sum its private wealth and of its own share of public liabilities. The preference for net wealth ensures that the Ricardian equivalence holds. The endogeneity of the ownership share through distortionary taxes is carefully investigated.

Suggested Citation

  • Jean-Baptiste MICHAU, 2019. "The Preference for Net Wealth," Working Papers 2019-12, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2019-12
    as

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    File URL: http://crest.science/RePEc/wpstorage/2019-12.pdf
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    References listed on IDEAS

    as
    1. Pascal Michaillat & Emmanuel Saez, 2021. "Resolving New Keynesian Anomalies with Wealth in the Utility Function," The Review of Economics and Statistics, MIT Press, vol. 103(2), pages 197-215, May.
    2. Michau, Jean-Baptiste, 2018. "Secular stagnation: Theory and remedies," Journal of Economic Theory, Elsevier, vol. 176(C), pages 552-618.
    3. Wagner, Alfred, 1891. "Marshall's Principles of Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 5, pages 319-338.
    4. Steedman, Ian W, 1981. "Time Preference, the Rate of Interest and Abstinence from Accumulation," Australian Economic Papers, Wiley Blackwell, vol. 20(37), pages 219-234, December.
    5. Michau, Jean-Baptiste & Ono, Yoshiyasu & Schlegl, Matthias, 2023. "Wealth preference and rational bubbles," European Economic Review, Elsevier, vol. 156(C).
    6. Ono, Yoshiyasu, 2001. "A Reinterpretation of Chapter 17 of Keynes's General Theory: Effective Demand Shortage under Dynamic Optimization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 207-236, February.
    7. Yoshiyasu Ono, 2015. "Growth, Secular Stagnation and Wealth Preference," ISER Discussion Paper 0946, Institute of Social and Economic Research, Osaka University.
    8. Jean-Baptiste MICHAU, 2019. "Helicopter Drops of Money under Secular Stagnation," Working Papers 2019-10, Center for Research in Economics and Statistics.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Hashimoto, Ken-ichi & Ono, Yoshiyasu & Schlegl, Matthias, 2023. "Structural unemployment, underemployment, and secular stagnation," Journal of Economic Theory, Elsevier, vol. 209(C).
    2. Michau, Jean-Baptiste & Ono, Yoshiyasu & Schlegl, Matthias, 2023. "Wealth preference and rational bubbles," European Economic Review, Elsevier, vol. 156(C).

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    More about this item

    Keywords

    Government debt; Preference for wealth; Ricardian equivalence.;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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