Peterman, William B.
Optimal public debt with life cycle motives / by William B. Peterman and Erick Sager
Resumen
Bibliografía
This paper determines optimal public debt in a life cycle model with incomplete markets that matches the empirically observed variation in consumption, labor, and savings. We find that public savings—not public debt—equal to 168 percent of output is optimal, primarily due to the influence of the life cycle on household decision-making. By inducing a lower interest rate, public savings slow consumption and leisure growth over an average household's lifetime, and the resulting flatter allocation of lifetime consumption and leisure improves welfare. These life cycle welfare benefits are large—on net, they outweigh the transitional costs from a tax-financed public debt elimination.
MERCADO DE TRABAJO
DEUDA PUBLICA
AHORRO
CICLOS ECONOMICOS
BIENESTAR SOCIAL
VIVIENDA
ESTADOS UNIDOS
Sager, Erick
American Economic Journal : Macroeconomics 1945-7707 v. 14, n. 4, October 2022, p. 404-437
Optimal public debt with life cycle motives / by William B. Peterman and Erick Sager
Resumen
Bibliografía
This paper determines optimal public debt in a life cycle model with incomplete markets that matches the empirically observed variation in consumption, labor, and savings. We find that public savings—not public debt—equal to 168 percent of output is optimal, primarily due to the influence of the life cycle on household decision-making. By inducing a lower interest rate, public savings slow consumption and leisure growth over an average household's lifetime, and the resulting flatter allocation of lifetime consumption and leisure improves welfare. These life cycle welfare benefits are large—on net, they outweigh the transitional costs from a tax-financed public debt elimination.
MERCADO DE TRABAJO
DEUDA PUBLICA
AHORRO
CICLOS ECONOMICOS
BIENESTAR SOCIAL
VIVIENDA
ESTADOS UNIDOS
Sager, Erick
American Economic Journal : Macroeconomics 1945-7707 v. 14, n. 4, October 2022, p. 404-437