Hyperbolic discounting, public debt and balanced budget rules

Huber, Bernd und Runkel, Marco (2008): Hyperbolic discounting, public debt and balanced budget rules. In: Scottish Journal of Political Economy, Bd. 55, Nr. 5: S. 543-560

Abstract

This paper considers a government that chooses its tax and borrowing policy in order to minimize the present value of the excess burden caused by taxation. In doing so, the government uses hyperbolic discounting. It turns out that public deficits are positive even if public expenditures are constant over time. With cyclical expenditures, the government chooses an asymmetric debt policy, i.e., in bad times it borrows more than it repays in good times. In contrast to tax smoothing and political economy theories of public debt, the welfare effects of a balanced budget rule are ambiguous.

• Dokumententyp: Zeitschriftenartikel
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Lehrstühle > Lehrstuhl für Finanzwissenschaft
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• Sprache: Englisch