Monopoly Wealth and International Debt

40 Pages Posted: 6 Apr 2007

See all articles by Jonathan Eaton

Jonathan Eaton

Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: 1988

Abstract

When rents generated by government policies are perceived as permanent, the rights to earn them may be capitalized as assets that form a component of nonhuman wealth. The existence of such assets raises international indebtedness, while shifts in policy that increase or reduce the importance of such rents can generate movements in the current account that are correlated with the real exchange rate. Because the elimination of policies that generate rents imposes a capital loss that Is born entirely by generations currently alive, while the benefit of the removal of a distortion is shared between those alive and unborn generations, a possibility is that such a reform can reduce the expected lifetime welfare of everyone alive. If monopoly exists in the provision of nontraded goods then there may be several steady states that can be Pareto ranked.

Suggested Citation

Eaton, Jonathan, Monopoly Wealth and International Debt (1988). NBER Working Paper No. w2485. Available at SSRN: https://ssrn.com/abstract=978415

Jonathan Eaton (Contact Author)

Leonard N. Stern School of Business - Department of Economics ( email )

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