Optimal Public Debt with Life Cycle Motives
在一个匹配消费、劳动和储蓄实证特征的生命周期模型中，发现最优政策是公共储蓄而非公共债务，其规模达产出的168%，通过降低利率使终身消费和休闲分配更平坦，从而改善福利。
This paper determines optimal public debt in a life cycle model with incomplete markets that matches the empirically observed variation in consumption, labor, and savings. We find that public savings—not public debt—equal to 168 percent of output is optimal, primarily due to the influence of the life cycle on household decision-making. By inducing a lower interest rate, public savings slow consumption and leisure growth over an average household’s lifetime, and the resulting flatter allocation of lifetime consumption and leisure improves welfare. These life cycle welfare benefits are large—on net, they outweigh the transitional costs from a tax-financed public debt elimination.