Matching grants and Ricardian equivalence

Matching grants and Ricardian Equivalence

This paper investigates the effectiveness of matching grants to correct for interjurisdictional spillovers in the light of Bernheim general neutrality result. Indeed this result suggests that the usual argument that matching grants are needed to internalize the externality arising from the existence of interjuridictional spillovers is an artifact of the assumption that jurisdictions neglect the...

Ricardian Equivalence Survives Strategic Behavior

Robert Barro (1974) showed government debt has no real effects when generations are linked by altruistically motivated intergenerational transfers, a result now known widely as the Ricardian Equivalence Theorem. An important condition for debt neutrality is believed to be the absence of strategic interactions between members of different generations. I use a simple two-period, parent and child ...

Ricardian Equivalence with Incomplete Household Risk Sharing

Several important empirical studies (for example, Altonji, Hayashi, and Kotlikoff, 1992, 1996, 1997) have found that households are not altruistically linked in a way consistent with the standard Ricardian model, as put forward by Barro (1974). We built a two-sided altruistic-linkage model in which private transfers are made in the presence of two types of shocks: an observable shock that is pu...

Review of Ricardian Equivalence: Theoretical and Empirical Studies

Intergenerational Altruism, Ricardian Equivalence and the Relevance of Distributional Policy

In recent years there has been a growing controversy concerning the e¤ective role of distributional policy in economies in which agents hold altruistic preferences. We show that in order to establish cross sectional Distributional Neutrality households require information on consanguinity links prior to making their decisions on consumption and bequests. If such information is not available due...