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Coordinating intergenerational redistribution and the repayment of public debt: an experimental test of Tabellini (1991)

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  • Christoph March

    (Technische Universität München
    CESifo
    University of Bamberg)

  • Robert K. Weizsäcker

    (Technische Universität München
    CESifo
    IZA)

Abstract

Is there a link between public debt and wealth inequality? Could government bondholders use intra-generational redistribution strategically to make the repayment of debt politically viable? We reconsider the model of Tabellini (J Polit Econ 99:335–357, 1991) and expose the role of coordination and divide-and-conquer. By coordinating their bond investments, the old generation splits up the young generation and secures a majority favoring debt repayment. Coordination therefore mediates the impact of wealth inequality on public debt. We test the model in a laboratory experiment and find that subjects often coordinate to exploit the link between inter- and intragenerational redistribution. Hence, coordination plays an important role in the strategic creation and exploitation of minorities, and thus in the accumulation of public debt.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:sochwe:v:55:y:2020:i:2:d:10.1007_s00355-020-01242-6
    DOI: 10.1007/s00355-020-01242-6
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