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
Institutions:	Department of Economics, University of Massachusetts-Amherst
Subject:	Public debt \| dynamic efficiency \| growth effects \| austerity

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Extent:	application/pdf
Series:	UMASS Amherst Economics Working Papers.
Type of publication:	Book / Working Paper
Classification:	E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation ; E22 - Capital; Investment (including Inventories); Capacity
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010902495