Sustainable Public Debt and Economic Growth Under Wage Rigidity

23 Pages Posted: 25 Oct 2011 Last revised: 30 Dec 2012

See all articles by Alfred Greiner

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 25, 2011

Abstract

We analyze effects of public debt on economic growth in a basic endogenous growth model with persistent unemployment due to wages rigidities. We show that there exists either a unique balanced growth path or there are two balanced growth paths depending on structural parameters and on the flexibility of the labour market. Further, public debt does not affect long-run growth and employment but only stability of the economy. Stability is more likely when governments put a high weight on stabilizing the public debt to GDP ratio.

Keywords: Public debt, endogenous growth, unemployment, wage rigidities, dynamics

JEL Classification: H63, E24, O41

Suggested Citation

Greiner, Alfred, Sustainable Public Debt and Economic Growth Under Wage Rigidity (October 25, 2011). Available at SSRN: https://ssrn.com/abstract=1949116 or http://dx.doi.org/10.2139/ssrn.1949116

Alfred Greiner (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
Bielefeld, 33501
Germany
+49 521 106 4859 (Phone)
+49 521 106 67120 (Fax)

HOME PAGE: http://phoenix.wiwi.uni-bielefeld.de/lehrbereiche/vwl/wipol

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
117
Abstract Views
652
rank
260,067
PlumX Metrics