FORSCHUNGSBERICHT 2004 - am Fachbereich ...

WiSo-Forschungsbericht 2004 - Lehrstuhl für VWL, insbes. Finanzwissenschaft 178
Last der Schuldenpolitik zu tragen hat und in welcher Form
sich die Last manifestiert.
3.3 Public debt, tax-exempt bonds, and Ponzi games
Bearbeiter: Prof. Dr. Berthold U. Wigger
Projektstart und -ende: 07/2004 - 12/2004
Charakterisierung: The neoclassical overlapping generations economy has com-
petitive equilibria in which the growth rate of the labor force
exceeds the long-run return on capital. In this case the econ-
omy is said to be dynamically inefficient and the government
can play a Ponzi game. This means that the government can
issue bonds and roll over interest and principal from period to
period by perpetually issuing new bonds to render debt ser-
vice. Such a Ponzi game is beneficial as it removes overac-
cumulation of capital associated with dynamic inefficiency.
Many authors have studied the properties of Ponzi games in
dynamically inefficient economies. The present project dem-
onstrates that the government can even run a Ponzi game if
the bondless economy is dynamically efficient. This becomes
possible when the return on private bonds or equity is taxed
and the government issues tax-exempt bonds. In contrast to
a traditional Ponzi game, however, a Ponzi game based on
the issuance of tax-exempt bonds is not beneficial as it low-
ers welfare of current and future generations.
3.4 Public Debt, Human Capital Formation, and Dynamic Inefficiency
Bearbeiter: Prof. Dr. Berthold U. Wigger
Projektstart und -ende: 01/2004 - 05/2004
Charakterisierung: The project considers public debt in an economy where hu-
man capital formation sustains long-run per capita income
growth. It shows that contrary to what has been obtained in
other types of endogenous growth economies public debt
may benefit current and future generations by removing dy-
namic inefficiency.