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The Effectiveness of Government Debt and Transfers as Insurance

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  • Martin Floden

    (Stockholm School of Economics)

Abstract

Government debt and redistributive taxation can help people to smooth consumption when facing uninsurable individual specific risk. I examine the effects that variations in public debt and transfers have on risk sharing, efficiency, and the distribution of resources. I find that risk sharing can be improved significantly by both debt and transfers, but that debt has adverse effects on equity. When used in isolation, debt will enhance welfare if transfers are lower than optimal. However, the beneficial effects of public debt vanish if transfers are used optimally.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

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  • Martin Floden, 2000. "The Effectiveness of Government Debt and Transfers as Insurance," Econometric Society World Congress 2000 Contributed Papers 1013, Econometric Society.
    • Handle: RePEc:ecm:wc2000:1013
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    More about this item

    JEL classification:

    • 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
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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