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

Author

Listed:
  • Noritaka Maebayashi

    () (Faculty of Economics and Business Administration, The University of Kitakyushu)

  • Kunihiko Konishi

    () (Institute of Economic Research, Kyoto University)

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.

Suggested Citation

  • Noritaka Maebayashi & Kunihiko Konishi, 2016. "Sustainability of the public debt and wealth inequality in a general equilibrium model," Discussion Papers in Economics and Business 16-33, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:1633
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal sustainability; Public debt; Wealth inequality; Redistributive policy; Endogenous growth;

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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