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Fiscal Deficits, Asset Prices and Intergenerational Distribution in an Open Unionized Economy

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  • Erling Steigum Jr.

Abstract

This paper focuses on intergenerational welfare effects of fiscal deficits in an OLG model with wage bargaining and equilibrium unemployment. Changes in wage and profit tax rates alter the intergenerational distribution by affecting capital accumulation as well as the price of a fixed asset. The welfare effect on the first old generation crucially depends on the tax instruments applied. The intergenerational welfare effects of postponing labor taxes are qualitatively similar to the effects in a model without unions. Increased union power will depress output and the asset price, but the sign of the welfare effect in steady state is nevertheless ambiguous.

Suggested Citation

  • Erling Steigum Jr., "undated". "Fiscal Deficits, Asset Prices and Intergenerational Distribution in an Open Unionized Economy," EPRU Working Paper Series 97-19, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:epruwp:97-19
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    File URL: http://web.econ.ku.dk/epru/files/wp/wp9719.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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