Household Debt, Corporate Debt, and the Real Economy: Some Empirical Evidence
In: Asian Development Bank Economics Working Paper Series No. 567 (December, 2018)
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In: Asian Development Bank Economics Working Paper Series No. 567 (December, 2018)
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Working paper
In 2011, the publicly held debt-to-GDP ratio in the United States reached 68% and is expected to continue rising. Many proposals to curb the government deficit and the resulting debt are being discussed. In this paper, we use the standard neoclassical growth model to examine the future path of output, budget deficits, and debt in the U.S. economy under different tax policies. While this framework is relatively simple, it incorporates the general equilibrium effects of tax policy, which are often missing from the Congressional Budget Office projections. Our results show that debt-to-GNP ratios above 100% are likely to continue into the future and that even small labor supply elasticities have a significant impact on these projections. We also find that labor income tax rates higher than 40% are needed for the deficit-to-GNP ratio to return to its historical level in the long run. Such high tax rates, however, result in about 10% lower per capita GNP and large welfare costs at the steady state compared to the historical tax rates.
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In: Midwest Finance Association Meetings; American Economic Association Meetings;
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In: Government Budgeting and Financial Management in Practice; Public Administration and Public Policy, S. 255-274
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In: Ethics & international affairs, Band 21, Heft S1, S. 41-79
ISSN: 1747-7093
In: CEPAL review, Band 2004, Heft 84, S. 97-113
ISSN: 1684-0348
In: Structural change and economic dynamics, Band 6, Heft 2, S. 215-236
ISSN: 1873-6017
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World Affairs Online