Death and the Keynesian multiplier |
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| Institution: | 1. Department of Economics, University of Warwick, Coventry CV4 7AL, U.K.;2. Dipartimento di Metodi Quantitativi e Teoria Economica, Universita degli Studi di Chieti G. D''Annunzio, Viale Pindaro 42, 65127 Pescara, Italy;1. Équipe transformation et élaboration des produits agro-alimentaires (TEPA), laboratoire de nutrition et technologies alimentaires (LNTA), institut de la nutrition de l’alimentation et des technologies agro-alimentaire (INATAA) université Frères-Mentouri-Constantine, route Ain-El-Bey, 25000 Constantine, Algérie;2. Inra-Nantes, unité des biopolymères, interactions et assemblage (BIA), équipe fonctions et interactions des protéines (FIP), 44316 Nantes, France;1. Service de neurologie, Clermont université, université d’Auvergne, Neuro-Dol, Inserm U-1107, 58, rue Montalembert, 63000 Clermont-Ferrand, France;2. Service de neurologie, université d’Auvergne, CHU Gabriel-Montpied, 63000 Clermont-Ferrand, France;3. Service d’anesthésie, hôpital Raymond-Poincaré, Garches, Assistance publique–Hôpitaux de Paris, 92380 Paris, France;4. Inserm, U-987, centre d’évaluation et de traitement de la douleur, hôpital Ambroise-Paré, 92100 Boulogne-Billancourt, France;5. Université Versailles-Saint-Quentin, 78035 France |
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| Abstract: | The Blanchard-Yaari continuous-time model of overlapping generations is applied to a monetary economy with Keynesian unemployment. It is shown that a positive probability of death increases the short- and long-run multipliers of government spending on output. In the first example this is due to the government deficit being bond-financed, plus the failure of Ricardian equivalence which death implies. In the second, where the government budget remains balanced, it is due to the private accumulation of capital, which has a wealth effect on consumption. However, in the absence of death, this is negated by the higher lifetime tax burden. |
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