Coordinating intergenerational redistribution and the repayment of public debt: an experimental test of Tabellini (1991). (English) Zbl 1451.91063
Summary: Is there a link between public debt and wealth inequality? Could government bondholders use intra-generational redistribution strategically to make the repayment of debt politically viable? We reconsider the model of
G. Tabellini [“The politics of intergenerational redistribution”, J. Polit. Econ. 99, 335–357 (1991; doi:10.1086/261753)] and expose the role of coordination and divide-and-conquer. By coordinating their bond investments, the old generation splits up the young generation and secures a majority favoring debt repayment. Coordination therefore mediates the impact of wealth inequality on public debt. We test the model in a laboratory experiment and find that subjects often coordinate to exploit the link between inter- and intragenerational redistribution. Hence, coordination plays an important role in the strategic creation and exploitation of minorities, and thus in the accumulation of public debt.
MSC:
| 91B15 | Welfare economics |
| 91B82 | Statistical methods; economic indices and measures |
| 91A90 | Experimental studies |
| 91A20 | Multistage and repeated games |
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