Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147329
Authors: 
March, Christoph
von Weizsäcker, Robert K.
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6075
Abstract: 
Is there a link between public debt and wealth inequality? Could government bondholders use intra-generational redistribution strategically to make the repayment of debt politically viable? Using a two-generations game-theoretic model, we identify coordination and divide-and-conquer as key factors. By coordinating their bond investments, the old generation may secure a majority favoring debt repayment. As a consequence, coordination mediates the impact of wealth inequality on public debt. Furthermore, ease of coordination offers another compelling reason why declining population growth fosters the accumulation of public debt. We test our model in a laboratory experiment and confirm the central predictions.
Subjects: 
government debt
intergenerational conflict
voting
experimental economics
JEL: 
H23
H63
D72
C92
Document Type: 
Working Paper

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