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Inequality and Public Debt: A Positive Analysis

Author

Listed:
  • Ryo Arawatari

    (Graduate School of Economics, Nagoya University)

  • Tetsuo Ono

    (Graduate School of Economics, Osaka University)

Abstract
This study extends the multi-country, politico-economic model of fiscal policy developed by Song, Storesletten, and Zilibotti (2012) to incorporate wage inequal- ity within each country. In this extended framework, we present conflict over fiscal policy within and across generations and show that a low-inequality country real- izes tight fiscal policy with low public debt accumulation, whereas a high-inequality country experiences loose fiscal policy with high public debt. This model predic- tion is consistent with empirical evidence from OECD countries for the past three decades.

Suggested Citation

  • Ryo Arawatari & Tetsuo Ono, 2015. "Inequality and Public Debt: A Positive Analysis," Discussion Papers in Economics and Business 15-01-Rev., Osaka University, Graduate School of Economics, revised Sep 2015.
  • Handle: RePEc:osk:wpaper:1501r
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    References listed on IDEAS

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    Cited by:

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    2. Jean-Louis Combes & Alexandru Minea & Cezara Vinturis & Pegdéwendé Nestor Sawadogo, 2019. "Can fiscal rules curb income inequality? Evidence from developing countries," Working Papers halshs-02423126, HAL.
    3. Yuki Uchida & Tetsuo Ono, 2024. "Generational Distribution of Fiscal Burdens: A Positive Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 393-430, February.
    4. Svavarsdottir, Gudrun & Clark, Andrew E. & Stefansson, Gunnar & Asgeirsdottir, Tinna Laufey, 2024. "Where does money matter more?," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 350-365.
    5. Borissov, Kirill & Kalk, Andrei, 2020. "Public debt, positional concerns, and wealth inequality," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 96-111.
    6. Uchida, Yuki & Ono, Tetsuo, 2021. "Political economy of taxation, debt ceilings, and growth," European Journal of Political Economy, Elsevier, vol. 68(C).
    7. Minjie Deng, 2024. "Inequality, Taxation, and Sovereign Default Risk," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(2), pages 217-249, April.
    8. Qaiser Munir & Sook Ching Kok & Winnie Abdulnasir, 2016. "Public debt sustainability and economic growth in Malaysia: Threshold and causality analysis," Proceedings of International Academic Conferences 5306868, International Institute of Social and Economic Sciences.
    9. Carrera, Jorge & de la Vega, Pablo, 2021. "The impact of income inequality on public debt," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    10. Rosaria Rita Canale & Rita Siano, 2024. "Is government debt a burden on workers' income share? An investigation on Italian dynamics," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 41(2), pages 543-563, July.
    11. Ryo Arawatari & Tetsuo Ono, 2023. "International coordination of debt rules with time‐inconsistent voters," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(1), pages 29-60, February.
    12. Jorge Carrera & Pablo De la Vega & Fernando Toledo, 2021. "Income Inequality and Fiscal Policy over the Political Cycle A Panel Estimation Model for Emerging Markets and Developing Economies," Asociación Argentina de Economía Política: Working Papers 4449, Asociación Argentina de Economía Política.
    13. Farzana Alamgir & Alok Johri, 2022. "International Sovereign Spread Differences and the Poverty of Nations," Department of Economics Working Papers 2022-06, McMaster University.

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    More about this item

    Keywords

    scal policy; inequality; probabilistic voting; public debt; small openeconomies.;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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