Efficiency and distributional effects of rising public debt - DUMAS - Dépôt Universitaire de Mémoires Après Soutenance Accéder directement au contenu
Mémoires Année : 2022

Efficiency and distributional effects of rising public debt

Résumé

Recent rises in government debt in the face of the COVID-19 pandemic, on top of already high debt-to-GDP ratios following the 2008 global economic crisis, puts the spot- light back on benefits and costs to economic efficiency and consequences for already high levels of wealth and income inequality. I develop a heterogeneous agent framework with incomplete markets and entrepreneurship that models differential savings behavior and het- erogeneous returns to capital to analyze changes in public debt. Increasing debt improves overall efficiency, but the reallocation of capital away from entrepreneurs limits aggregate productivity. A tighter borrowing constraint on entrepreneur capital investment increases difficulty growing out of financial constraints. Higher debt raises household savings, with workers increasing their savings by relatively more than entrepreneurs, which slightly re- duces wealth inequality. Workers, however, suffer a higher burden from losses in income and income inequality increases. Overall levels of welfare and consumption decrease, in which entrepreneur welfare gains that are dominated by the welfare losses of workers.
Fichier principal
Vignette du fichier
Harris G. - Efficiency and distributional _.pdf (1.41 Mo) Télécharger le fichier
Origine : Fichiers produits par l'(les) auteur(s)

Dates et versions

dumas-04188006 , version 1 (25-08-2023)

Identifiants

  • HAL Id : dumas-04188006 , version 1

Citer

Gemma Harris. Efficiency and distributional effects of rising public debt. Economics and Finance. 2022. ⟨dumas-04188006⟩
35 Consultations
79 Téléchargements

Partager

Gmail Facebook X LinkedIn More