Ricardian equivalence with uninformed consumers?

Michael Reiter

Research output: Contribution to journalArticle

Abstract

Empirical studies have shown that the majority of people are poorly informed about the size of government debts and deficits. This paper investigates whether it is nevertheless possible for households to mimic Ricardian behavior on the basis of those variables that they actually observe. In a simple two-period model, it is shown that imperfect information about government debt can lead to departures from Ricardian equivalence even if the households' estimates of debt are unbiased. The paper discusses why households face difficulties in obtaining relevant information about government debt.

Original languageEnglish (US)
Pages (from-to)747-758
Number of pages12
JournalEuropean Journal of Political Economy
Volume15
Issue number4
DOIs
StatePublished - Nov 1999

Keywords

  • Bounded rationality
  • Government deficits
  • Ricardian equivalence

ASJC Scopus subject areas

  • Economics and Econometrics
  • Political Science and International Relations

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