Understanding the Emergence of Public Debt

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4820

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Group Behavior ; Public Goods ; National Debt; Debt Management; Sovereign Debt
• Subject: public debt and taxation ; government spending ; budget deficit ; balanced budget ; common pool resources

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fochmann, Martin ; Sadrieh, Abdolkarim ; Weimann, Joachim
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/102111
• Last update: 10.03.2025, 11:44 AM CET