Dynamic inefficiency and fiscal interventions in an economy with land and transaction costs
| Autor: | Hellwig, Martin |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
Dynamic inefficiency
General [C15 - Statistical Simulation Methods] E21 - Consumption Saving Wealth H63 - Debt Debt Management Sovereign Debt overlapping-generations models with land transaction costs D61 D61 - Allocative Efficiency Cost–Benefit Analysis ddc:330 public debt H63 pay-as-you-go retirement provision E62 - Fiscal Policy D15 E62 fiscal policy E21 |
| Popis: | In the discussion whether real interest rates smaller than real growth rates can be taken as evidence of dynamic inefficiency that calls for fiscal interventions, a seemingly killing objection points to land, a non-produceddurable asset in positive supply, as a reason why dynamic inefficiency can be ruled out. If real interest rates were expected to be below real growth rates forever, the value of land would be unbounded, which is incompatible with equilibrium. The paper shows that this objection is not robust to the presence of an arbitrarily small per-unit-of-value transaction cost. The paper also specifies fiscal interventions that provide for Pareto improvements even though they involve a resource cost. For the debate about public debt policy, the land argument is a red herring because it is incompatible with the presence of fiat money and debt denominated in units of fiat money. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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