Government Debt, Agent Heterogeneity and Wealth Displacement in a Small Open Economy

Petrucci, Alberto (2002) Government Debt, Agent Heterogeneity and Wealth Displacement in a Small Open Economy. [Working Paper]. p. 36. Fondazione Eni Enrico Mattei Working Paper (No. 80/2000).

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The consequences of government debt on capital formation, financial wealth and labor are investigated in a small open economy with demographic heterogeneity. Two alternative types of demographics are considered: one with intragenerational heterogeneity of the ''savers-spenders'' (SS) type, and one with intergenerational heterogeneity of the OLG type. The effects of debt and the financial crowding out morphology strictly depend on the type of demographic heterogeneity. While in the SS economy debt crowds out capital, increases net foreign assets and contracts labor, in the OLG economy it generates the exact opposite results. Our results differ substantially from those observed in a closed economy, where the type of demographic heterogeneity plays no qualitative role for the effects of debt on wealth and factor employment.

Item Type: Report / Paper (Working Paper)
Research documents and activity classification: Working Papers > Non-Refereed Working Papers / of national relevance only
Divisions: Department of Business and Management
Uncontrolled Keywords: Government debt, savers-spenders, overlapping-generations, capital formation, net foreign assets.
MIUR Scientific Area: Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited by: Maria Teresa Nisticò
Date Deposited: 13 Dec 2010 16:50
Last Modified: 22 Apr 2015 00:13


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