Public debt in an OLG model with imperfect competition: long-run effects of austerity programs and changes in the growth rate

We show that (i) dynamic inefficiency may be empirically relevant in a modified Diamond model with imperfect competition, (ii) if fiscal policy is used to avoid inefficiency and maintain an optimal capital intensity, the required debt ratio will be inversely related to the growth rate, and (iii) austerity policies reductions in government consumption and entitlement programs for the old generation raise the required debt ratio.

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Year of publication:	2013
Authors:	Skott, Peter ; Ryoo, Soon
Publisher:	Amherst, MA : University of Massachusetts, Department of Economics
Subject:	Public debt \| dynamic efficiency \| growth effects \| austerity

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Series:	Working Paper ; 2013-10
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	770491006 [GVK] hdl:10419/105768 [Handle] RePEc:ums:papers:2013-10 [RePEc]
Classification:	E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation ; E22 - Capital; Investment (including Inventories); Capacity
Source:	EconStor

Persistent link: https://www.econbiz.de/10010457021