Are government bonds net wealth?

The assumption that government bonds are perceived as net wealth by the private sector is crucial in demonstrating real effects of shifts in the stock of public debt. In particular, the standard effects of "expansionary" fiscal policy on aggregate demand hinge on this assumption. Governmen...

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Bibliographic Details
Main Author: Barro, Robert J
Format: Book
Published: Chicago, Ill. University of Chicago Press November-December 1974
Series:Journal of Political Economy n. 6
Subjects:

MARC

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082 |a H 58140 n. 6, 1974 
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100 |a Barro, Robert J 
245 |a Are government bonds net wealth? 
260 |b University of Chicago Press 
260 |a Chicago, Ill. 
260 |c November-December 1974 
300 |a pp. 1095-1117 
490 |a Journal of Political Economy  |v n. 6  |x 00223808 
504 |a Incluye bibliografía 
520 |a The assumption that government bonds are perceived as net wealth by the private sector is crucial in demonstrating real effects of shifts in the stock of public debt. In particular, the standard effects of "expansionary" fiscal policy on aggregate demand hinge on this assumption. Government bonds will be perceived as net wealth only if their value exceeds the capitalized value of the implied stream of future tax liabilities. This paper considers the effects on bond values and tax capitalization of finite lives, imperfect private capital markets, a government monopoly in the production of bond "liquidity services," and uncertainty about future tax obligations. It is shown within the context of an overlapping-generations model that finite lives will not be relevant to the capitalization of future tax liabilities so long as current generations are connected to future generations by a chain of operative intergenerational transfers (either in the direction from old to young or in the direction from young to old). Applications of this result to social security and to other types of imposed intergenerational transfer schemes are also noted. In the presence of imperfect private capital markets, government debt issue will increase net wealth if the government is more efficient, at the margin, than the private market in carrying out the loan process. Similarly, if the government has monopoly power in the production of bond "liquidity services," then public debt issue will raise net wealth. Finally, the existence of uncertainty with respect to individual future tax liabilities implies that public debt issue may increase the overall risk contained in household balance sheets and thereby effectively reduce household wealth 
650 |a POLITICA FISCAL  
650 |a BONOS DEL TESORO  
650 |a SEGURIDAD SOCIAL 
650 |a POLITICA TRIBUTARIA  
653
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