This paper studies the political-economic equilibrium of a two-period
model with overlapping generations. In each period the policy is chosen
under majority rule by the generations currently alive. The paper
identifies a "sustainable set" of values for public debt. Any amount of
debt within this set is fully repaid in equilibrium, even in the absence of
commitments. By issuing debt within this set, the first generation of
voters redistributes revenue in its favor and away from the second
generation. The paper characterizes the determinants of the equilibrium
intergenerational redistribution carried out in this way, and points to a
difference between debt policy and social security legislation as
instruments of redistribution. The key features of the model are
heterogeneity within each generation and altruism across generations.
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