Government Debt, Life-Cycle Income and Liquidity Constrains : Beyond Approximate Ricardian Equivalence

Beyond Approximate Ricardian Equivalence

Government Debt, Life-Cycle Income and Liquidity Constrains : Beyond Approximate Ricardian Equivalence
Evans (1991) has demonstrated that Blanchard's (1985) finite-horizon model obeys approximate Ricardian equivalence. We show that this result is determined largely by an unrealistic assumption that labor income grows monotonically over a consumer's entire lifetime. Introducing more realistic lifetime earnings profiles, we find that the effects of... READ MORE...

Publication date: December 1996
ISBN 9781451928778
$15.00

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