Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102111
Authors: 
Fochmann, Martin
Sadrieh, Abdolkarim
Weimann, Joachim
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4820
Abstract: 
We use a controlled laboratory experiment with and without overlapping generations to study the emergence of public debt. Public debt is chosen by popular vote, pays for public goods, and is repaid with general taxes. With a single generation, public debt is accumulated prudently, never leading to over-indebtedness. With multiple generations, public debt is accumulated rapidly as soon as the burden of debt and the risk of over-indebtedness can be shifted to future generations. Debt ceiling mechanisms do not mitigate the debt problem. With overlapping generations, political debt cycles emerge, oscillating with the age of the majority of voters.
Subjects: 
public debt and taxation
government spending
budget deficit
balanced budget
common pool resources
JEL: 
C92
H41
H63
Document Type: 
Working Paper

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