IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/2053.html
   My bibliography  Save this paper

Is Debt Neutral in the Life Cycle Model?

Author

Listed:
  • Laurence J. Kotlikoff

Abstract

This paper questions the widely accepted view that deficits have real effects in the life cycle model. Standard analyses of deficits within life cycle models treat the government as a dictatorial entity that can effect any intergenerational redistribution it desires. In contrast, this paper drops the assumption of compulsion and models the government as a coalition of self-interested young and old generations whose bargaining determines government decisions. Since each generation is selfish, no generation will voluntarily absorb the debts of another except as a quid pro quo for receiving particular goods or services. Hence, redistribution per se between generations will not arise. Because each generation is ultimately responsible for its own liabilities, deficit finance, while altering the timing of tax receipts, has no economic impact.

Suggested Citation

  • Laurence J. Kotlikoff, 1986. "Is Debt Neutral in the Life Cycle Model?," NBER Working Papers 2053, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2053
    Note: PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w2053.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Laurence J. Kotlikoff & Torsten Persson & Lars E.O. Svensson, 1986. "Laws as Assets: A Possible Solution to the Time Consistency Problem," NBER Working Papers 2068, National Bureau of Economic Research, Inc.
    3. Kotlikoff, Laurence J, 1984. "Taxation and Savings: A Neoclassical Perspective," Journal of Economic Literature, American Economic Association, vol. 22(4), pages 1576-1629, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. B. Douglas Bernheim, 1987. "Ricardian Equivalence: An Evaluation of Theory and Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 263-316, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Miguel-Angel Lopez-Garcia, 1997. "When) is Consumption Taxation Equivalent to Wage Taxation ?," Public Finance Review, , vol. 25(1), pages 83-101, January.
    2. Lekha S. Chakraborty, 2012. "Interest Rate Determination in India: Empirical Evidence on Fiscal Deficit--Interest Rate Linkages and Financial Crowding Out," Economics Working Paper Archive wp_744, Levy Economics Institute.
    3. Philippe Weil, 2008. "Overlapping Generations: The First Jubilee," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 115-134, Fall.
    4. repec:idb:brikps:377 is not listed on IDEAS
    5. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
    6. Kerttula, Anne, 1989. "Capital income taxation and household saving," Research Discussion Papers 29/1989, Bank of Finland.
    7. Chakraborty, Lekha, 2012. "Determination of Interest Rate in India: Empirical Evidence on Fiscal Deficit-Interest Links and Financial Crowding Out," Working Papers 12/110, National Institute of Public Finance and Policy.
    8. R. Glenn Hubbard & Kenneth L. Judd, 1985. "Social Security and Individual Welfare: Precautionary Saving, LiquidityConstraints, and the Payroll Tax," NBER Working Papers 1736, National Bureau of Economic Research, Inc.
    9. Miguel Angel Lopez Garcia, 1994. "On taxation in a model of intergenerational altruism," Investigaciones Economicas, Fundación SEPI, vol. 18(2), pages 381-389, May.
    10. Gál, Róbert Iván, 1996. "A társadalombiztosítási programok ösztönző hatásai [Incentive effects of social security programs: a survey]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 128-140.
    11. Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc.
    12. R. Glenn Hubbard & Kenneth L. Judd, 1987. "Finite Lifetimes, Borrowing Constraints, and Short-Run Fiscal Policy," NBER Working Papers 2158, National Bureau of Economic Research, Inc.
    13. Ferhan Salman, 2004. "Balancing Turkey�s Intertemporal Budget Gap," Working Papers 0408, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    14. repec:zbw:bofrdp:1989_029 is not listed on IDEAS
    15. Savaş ÇEVİK, 2015. "Domestic Saving and Tax Structure: Evidence from Turkey," Sosyoekonomi Journal, Sosyoekonomi Society, issue 23(23).
    16. Reiner Eichenberger & David Stadelmann, 2009. "Consequences of Debt Capitalization: Property Ownership and Debt/Tax Choice," CREMA Working Paper Series 2009-08, Center for Research in Economics, Management and the Arts (CREMA).
    17. Francisco Alvarez-Cuadrado & Ngo Van Long, 2012. "Envy and Inequality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 949-973, September.
    18. Xinshen DIAO & Terry L. ROE & A. Erinç YELDAN, 1999. "How Fiscal Mismanagement May Impede Trade Reform: Lessons From An Intertemporal, Multi-Sector General Equilibrium Model For Turkey," The Developing Economies, Institute of Developing Economies, vol. 37(1), pages 59-88, March.
    19. Mengyuan Zhou, 2022. "Does the Source of Inheritance Matter in Bequest Attitudes? Evidence from Japan," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 867-887, December.
    20. Grossmann, Volker, 2008. "Risky human capital investment, income distribution, and macroeconomic dynamics," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 19-42, March.
    21. Jellal, Mohamed, 2009. "Family Institution and Filial Attention Contract," MPRA Paper 17713, University Library of Munich, Germany.
    22. António Afonso, 2007. "An Avenue for Expansionary Fiscal Contractions," The IUP Journal of Public Finance, IUP Publications, vol. 0(3), pages 7-15, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2053. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.