Public debt and income inequality in an endogenous growth model with elastic labor supply

ABSTRACT: In this study, we examine the relationships among long-run public debt policy, economic growth, and income inequality by extending a representative consumer theory of distribution and using an endogenous growth model with a sustainable fiscal rule, elastic labor supply, and initial endowment of heterogeneous wealth. We show that fiscal policy with strict (loose) budgetary discipline decreases (increases) the economic growth rate in the short run. In contrast, it increases (decreases) the economic growth rate in the long run. Then, we show that fiscal policy with strict (loose) budgetary discipline decreases (increases) income inequality in both the short and long run. First, we show that a balanced growth path is a locally stable saddle point. Then, we consider the relationships among publ

SUBMITTER: Miyashita D 

PROVIDER: S-EPMC9976693 | biostudies-literature | 2023 Mar

REPOSITORIES: biostudies-literature