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Government Debt,Income Distribution and Growth

You, Jong Il

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Abstract

This paper takes up the question of whether government debt worsens the distribution of income as tax revenues from workers are used to pay for the interest on the debt held by the rich. In so doing, we develop a post-Keynesian model in which growth is determined by aggregate demand rather than by die supply of resources and income is distributed between workers who earn wages and capitalists who receive profit and interest income. Our analysis highlights the possible expansionary effect of a rise in government debt which may raise the income of the workers, and it shows that its precise effect on income inequality depends on die circumstances under which government debt rises.

Issue Date
1996-05
Publisher
Oxford University Press
DOI
10.1093/oxfordjournals.cje.a013619
Journal Title
Cambridge Journal of Economics
Start Page
335
End Page
351
ISSN
0309-166X
Language
English
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