Debt-sharing and secession : a generational accounting approach

This paper investigates one of the most important financial issues arising from a secession or a country partioning, namely the sharing of the national public debt. Extending Dreze's distributive neutrality condition, we use the generational accounting technique and propose a dynamic debt-sharing criterion which takes into account both the true debt future generations inherit and their contributive capacity. The equivalence with Dreze's static rule is only obtained in the steady growth framework in the absence of initial regional debt. An application of our criterion to the Belgian case offers striking results.