Ricardian Equivalence: An Empirical Application to the Portuguese Economy

Review of Ricardian Equivalence: Theoretical and Empirical Studies

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...

Debt Stabilization in a Non-Ricardian Economy

In models with a representative infinitely lived household, modern versions of tax smoothing imply that the steady-state of government debt should follow a random walk. This is unlikely to be the case in OLG economies, where, the equilibrium interest rate may differ from the policy-maker’s rate of time preference such that it may be optimal to reduce debt today to reduce distortionary taxation ...