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Heterogeneous Dynasties and the Political Economy of Public Debt

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  • Gregory De Walque
  • Louis Gevers

Abstract

We consider a small open overlapping generations economy with descending altruism. Heterogeneity is introduced by assuming that each parent procreates a fixed proportion of selfish children. Altruistic parents can recognize the type of each child. There is no Ricardian equivalence and an active public intergenerational transfer policy is attractive to altruistic dynasty members, although there may be no unanimity among them. We display reasonable conditions for indirect preferences to be single‐peaked and we apply the median voter theorem. We then describe political equilibrium paths and discuss their compatibility with the steady path of an underlying closed economy with autonomous labor productivity growth. JEL classification: D31; D64; D72; D91; H63

Suggested Citation

  • Gregory De Walque & Louis Gevers, 2001. "Heterogeneous Dynasties and the Political Economy of Public Debt," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(3), pages 369-389, September.
    • Handle: RePEc:bla:scandj:v:103:y:2001:i:3:p:369-389
    DOI: 10.1111/1467-9442.00251
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    Cited by:

    1. Ryo Arawatari & Tetsuo Ono, 2015. "Redistributive Politics And Government Debt In A Borrowing-Constrained Economy," Bulletin of Economic Research, Wiley Blackwell, vol. 67(1), pages 83-103, January.
    2. Grégory De Walque, 2005. "Voting on Pensions: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 19(2), pages 181-209, April.
    3. Ryo Arawatari & Tetsuo Ono, 2017. "Inequality and public debt: A positive analysis," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 1155-1173, November.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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