Public debt and the issue of intergenerational burden

?No-shifting approach?, the dominant view in the economics literature to evaluate theintergenerational effects of public debt until the late 1950?s, which argues public debt doesn?tgenerate any burden for the future generations, ?the dissenter view? that suggests public debtgenerates inequalities in the intergenerational resource allocation as a result of decrease in thecapital stock, utility and the consumption possibilities of future generations, ?the overlappinggenerations model?, based on the the life cycle theory of income, shows different generationsat different age groups can be added to the analysis, ?the generational accounting? approacharguing the official budget deficit and public debt statistics are insignificant indicators toevaluate intergenerational effects of fiscal policy constitutes the theoretical background todetermine if public debt generates any intergenerational burden or not.In this study, the possible effects of public debt accumulation on the capital stock andthe consumption possibilities of different generations as a result of the income tax cut, lasting1, 5 and 10 years, were examined in line with the overlapping generations dynamic generalequilibrium model, consisting of 55 generations, constructed for the Turkish economyrepresenting the year 1998 .The results of the study show that increases in the public debt maycause important decreases in the capital stock, while it may increase the consumptionpossibilities of all generations. On the other hand, the simulations show that the duration ofthe tax cut causes important effects on the decrease of the capital stock.Keywords : Public debt, capital stock, overlapping generations model, computable generalequilibrium models, intergenerational burden.