FRINK Linked Data Fragments server

Matches in SemOpenAlex for { <https://semopenalex.org/work/W2912659886> ?p ?o ?g. }

• W2912659886 abstract "This study exploits the trade-off between government debt as an asset that can be used for self- insurance against idiosyncratic income shocks and the distortions on labor and capital supply created by taxes needed to finance debt. In deriving optimal debt level, the paper explicitly considers a trade-off between the pain of fiscal adjustment (assuming that the current debt ratio is above the steady state optimal one) and the gain from reaching the ideal steady state level. To determine the optimal quantity of public debt the study uses a heterogeneous agent closed-economy model with incomplete insurance markets and endogenous labour supply. Furthermore, the model is enriched by welfare-increasing government activity via by productive government investment and provision of public goods. The modelling framework with uninsurable idiosyncratic productivity shocks, the degree of inequality implied by the model and restricted borrowing give rise to non-trivial effects of public debt on the economy. On the one hand, higher public debt can relax borrowing constraints of households by increasing liquidity and thus facilitating consumption-smoothing. On the other hand, rising public debt crowds out private investments and therefore lowers wages and consumption in equilibrium. Therefore, a priori it is not clear which effect is stronger. The optimal public debt is determined based on welfare comparison between stationary equilibria when transitional dynamics are either ignored or accounted for. The paper shows that public investments play an important role as they generate positive spillover effects in the private sector by boosting the productivity of labor and capital. This reduces the precautionary savings motives for households, as they can rely more on labor income. Transitionary welfare effects work differently. Reduction in public debt leads to a reduction of the tax rate in the long run. However, debt reduction requires an increase in the tax rate in the short run, which has a negative effect on welfare. Therefore, ignoring these adjustment costs, optimal debt levels would be very large and negative (government accumulates assets of 130 percent of GDP) accompanied with large welfare gains (more than 20 percent) which is fully consistent with the literature on optimal public debt (Chatterjee et al. (2017), Rohrs and Winter (2017), Aiyagari and McGrattan (1998)). However, with transitional dynamics considered, the optimal debt ratio remains positive but lower than the current level of debt (27-30 percent of GDP). The corresponding consumption-equivalent welfare gains are low, between 1.91 and 2.27 percent depending on the presence of public investment. Relatively low optimal debt level is due to low level of idiosyncratic labor income volatility as a result of low empirical wealth inequality. Hence self-insurance via private capital is more than enough and higher provision of government insurance via sovereign bonds is not necessary. Furthermore, from the perspective of rapid population ageing expected in Slovakia, calls for even more prudent levels of public debt gain relevancy. The only reason why Slovakia should have public debt at all in this model is that it is painful to get rid of the existing debt. The validity of results is supported by numerous robustness check exercises: change to model calibration, different policy rule, modified tax system, impact of public goods provision on household social welfare." @default.
• W2912659886 created "2019-02-21" @default.
• W2912659886 creator A5008660927 @default.
• W2912659886 creator A5054658873 @default.
• W2912659886 date "2018-11-01" @default.
• W2912659886 modified "2023-09-27" @default.
• W2912659886 title "Optimal sovereign debt: Case of Slovakia" @default.
• W2912659886 cites W1603604196 @default.
• W2912659886 cites W1976682773 @default.
• W2912659886 cites W1991258191 @default.
• W2912659886 cites W2016510098 @default.
• W2912659886 cites W2017758178 @default.
• W2912659886 cites W2019784037 @default.
• W2912659886 cites W2038628481 @default.
• W2912659886 cites W2096218604 @default.
• W2912659886 cites W2100179158 @default.
• W2912659886 cites W2128754415 @default.
• W2912659886 cites W2151405999 @default.
• W2912659886 cites W2171095610 @default.
• W2912659886 cites W2187587120 @default.
• W2912659886 cites W2207072859 @default.
• W2912659886 cites W2223575500 @default.
• W2912659886 cites W2618210215 @default.
• W2912659886 cites W2624342415 @default.
• W2912659886 cites W2802766734 @default.
• W2912659886 cites W3122240942 @default.
• W2912659886 cites W3123481554 @default.
• W2912659886 cites W3124171181 @default.
• W2912659886 cites W3124542036 @default.
• W2912659886 cites W3121685485 @default.
• W2912659886 hasPublicationYear "2018" @default.
• W2912659886 type Work @default.
• W2912659886 sameAs 2912659886 @default.
• W2912659886 citedByCount "0" @default.
• W2912659886 crossrefType "posted-content" @default.
• W2912659886 hasAuthorship W2912659886A5008660927 @default.
• W2912659886 hasAuthorship W2912659886A5054658873 @default.
• W2912659886 hasConcept C106210156 @default.
• W2912659886 hasConcept C120527767 @default.
• W2912659886 hasConcept C139719470 @default.
• W2912659886 hasConcept C162324750 @default.
• W2912659886 hasConcept C17744445 @default.
• W2912659886 hasConcept C186229450 @default.
• W2912659886 hasConcept C199539241 @default.
• W2912659886 hasConcept C202189257 @default.
• W2912659886 hasConcept C2776675903 @default.
• W2912659886 hasConcept C2778126366 @default.
• W2912659886 hasConcept C2778489760 @default.
• W2912659886 hasConcept C2778762746 @default.
• W2912659886 hasConcept C2778782394 @default.
• W2912659886 hasConcept C2994464924 @default.
• W2912659886 hasConcept C2994482091 @default.
• W2912659886 hasConcept C524878704 @default.
• W2912659886 hasConcept C556758197 @default.
• W2912659886 hasConcept C94625758 @default.
• W2912659886 hasConceptScore W2912659886C106210156 @default.
• W2912659886 hasConceptScore W2912659886C120527767 @default.
• W2912659886 hasConceptScore W2912659886C139719470 @default.
• W2912659886 hasConceptScore W2912659886C162324750 @default.
• W2912659886 hasConceptScore W2912659886C17744445 @default.
• W2912659886 hasConceptScore W2912659886C186229450 @default.
• W2912659886 hasConceptScore W2912659886C199539241 @default.
• W2912659886 hasConceptScore W2912659886C202189257 @default.
• W2912659886 hasConceptScore W2912659886C2776675903 @default.
• W2912659886 hasConceptScore W2912659886C2778126366 @default.
• W2912659886 hasConceptScore W2912659886C2778489760 @default.
• W2912659886 hasConceptScore W2912659886C2778762746 @default.
• W2912659886 hasConceptScore W2912659886C2778782394 @default.
• W2912659886 hasConceptScore W2912659886C2994464924 @default.
• W2912659886 hasConceptScore W2912659886C2994482091 @default.
• W2912659886 hasConceptScore W2912659886C524878704 @default.
• W2912659886 hasConceptScore W2912659886C556758197 @default.
• W2912659886 hasConceptScore W2912659886C94625758 @default.
• W2912659886 hasLocation W29126598861 @default.
• W2912659886 hasOpenAccess W2912659886 @default.
• W2912659886 hasPrimaryLocation W29126598861 @default.
• W2912659886 hasRelatedWork W1495171038 @default.
• W2912659886 hasRelatedWork W1555154824 @default.
• W2912659886 hasRelatedWork W1593286914 @default.
• W2912659886 hasRelatedWork W1992037722 @default.
• W2912659886 hasRelatedWork W1992653051 @default.
• W2912659886 hasRelatedWork W2214713711 @default.
• W2912659886 hasRelatedWork W2311023463 @default.
• W2912659886 hasRelatedWork W2318410448 @default.
• W2912659886 hasRelatedWork W2510527078 @default.
• W2912659886 hasRelatedWork W2510657096 @default.
• W2912659886 hasRelatedWork W2529323790 @default.
• W2912659886 hasRelatedWork W2618210215 @default.
• W2912659886 hasRelatedWork W2739878826 @default.
• W2912659886 hasRelatedWork W2943537121 @default.
• W2912659886 hasRelatedWork W3121518867 @default.
• W2912659886 hasRelatedWork W3122233635 @default.
• W2912659886 hasRelatedWork W3123833362 @default.
• W2912659886 hasRelatedWork W3123954257 @default.
• W2912659886 hasRelatedWork W3124521337 @default.
• W2912659886 hasRelatedWork W3125970728 @default.
• W2912659886 isParatext "false" @default.
• W2912659886 isRetracted "false" @default.
• W2912659886 magId "2912659886" @default.
• W2912659886 workType "article" @default.