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The two sides of public debt: Intergenerational altruism and burden shifting

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  • Martin Fochmann
  • Florian Sachs
  • Abdolkarim Sadrieh
  • Joachim Weimann

Abstract

In controlled laboratory experiments with and without overlapping generations, we study the role of intergenerational altruism in public debt accumulation. Public debt is chosen by popular vote, pays for public goods, and is repaid with general taxes. We use an optimal control model to derive a theoretical benchmark. With a single generation, public debt is accumulated prudently. With multiple and over-lapping generations, the burden of debt and the risk of over-indebtedness are shifted to future generations. We find a weak but significant sign of intergenerational altruism, observing that the revealed debt preferences increase as the number of following generations decreases. However, we find considerably fewer intergenerational fairness concerns than one would expect on the basis of the behavioral and experimental literature. Instead, political debt cycles that vary with voters’ age emerge. Debt ceiling mechanisms fail to encourage intergenerational altruism and do not mitigate the problem of burden shifting.

Suggested Citation

  • Martin Fochmann & Florian Sachs & Abdolkarim Sadrieh & Joachim Weimann, 2018. "The two sides of public debt: Intergenerational altruism and burden shifting," PLOS ONE, Public Library of Science, vol. 13(8), pages 1-27, August.
    • Handle: RePEc:plo:pone00:0202963
    DOI: 10.1371/journal.pone.0202963
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    Cited by:

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    2. Raja Rajendra Timilsina & Koji Kotani & Yoshinori Nakagawa & Tatsuyoshi Saijo, 2023. "Does Being Intergenerationally Accountable Resolve the Intergenerational Sustainability Dilemma?," Land Economics, University of Wisconsin Press, vol. 99(4), pages 644-667.
    3. Timilsina, Raja R. & Kotani, Koji & Nakagawa, Yoshinori & Saijo, Tatsuyoshi, 2022. "Intragenerational deliberation and intergenerational sustainability dilemma," European Journal of Political Economy, Elsevier, vol. 73(C).
    4. Mostafa E. Shahen & Wada Masaya & Koji Kotani & Tatsuyoshi Saijo, 2020. "Motivational Factors in Intergenerational Sustainability Dilemma: A Post-Interview Analysis," Sustainability, MDPI, vol. 12(17), pages 1-16, August.
    5. Christoph March & Robert K. Weizsäcker, 2020. "Coordinating intergenerational redistribution and the repayment of public debt: an experimental test of Tabellini (1991)," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 55(2), pages 301-323, August.

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