Heterogeneous Dynasties and the Political Economy of Public Debt |
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Authors: | Gregory de Walque & Louis Gevers |
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Institution: | University of Namur, B-5000 Namur,;University of Namur, B-5000 Namur and CORE, B-1348 Louvain-la-Neuve |
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Abstract: | We consider a small open overlapping generations economy with descending altruism. Heterogeneity is introduced by assuming that each parent procreates a fixed proportion of selfish children. Altruistic parents can recognize the type of each child. There is no Ricardian equivalence and an active public intergenerational transfer policy is attractive to altruistic dynasty members, although there may be no unanimity among them. We display reasonable conditions for indirect preferences to be single-peaked and we apply the median voter theorem. We then describe political equilibrium paths and discuss their compatibility with the steady path of an underlying closed economy with autonomous labor productivity growth. JEL classification : D 31; D 64; D 72; D 91; H 63 |
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Keywords: | Median voter public debt altruism Ricardian equivalence |
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