| Summary: | High levels of either public debt or wealth inequality are detrimental to social and economic stability. At a time when reducing public debt and decreasing wealth inequality have become important policy priorities, the question arises about whether these two goals stand in con ict. With this in mind, Chapter 1 assesses the effects of public debt on wealth inequality based on an analytically tractable model of heterogeneous agents. Its scope, in particular, is to investigate whether a reduction of public debt or of budget deficits in general might amplify or not the levels of wealth inequality. In answering this question, we explore a novel channel where, for example, a reduction in budget deficits amplifies wealth inequality due to the change in factor prices, and in particular that of interest rates. Therefore, and besides that our research is the first to explore this type of question, our main contribution is that we show how a change in public debt can affect wealth inequality in an implicit way through the change in factor incomes - that is, the general equilibrium effects. In Chapter 2, on the other hand, we study the design of policies within an endogenous growth model of incomplete markets and partial commitment. Markets are incomplete in two dimensions, the government cannot insure itself from the presence of aggregate risk, and the accumulation of human capital is subject to idiosyncratic risk. Our primary contribution highlights the importance of human capital to effectively manage the economy along the cycle. More specifically, we make a novel argument: taking short run risks are effective responses to a shock that might depress the economy. An investment in human capital which is subject to idiosyncratic risk, serves that purpose. Its returns however, must be protected over-time through an effective provision of liquidity and manipulation of taxes. In our case this policy requires to subsidise physical capital and tax human capital, while the government must own assets. Finally, In Chapter 3 we estimate the fiscal multipliers for Greece. In particular, using the SVAR approach of Blanchard and Perotti we estimate the dynamic effects of government spending and tax revenues on output. The results over the available sample indicate some strong Keynesian effects. That is government spending multipliers are large while the tax multipliers are relatively small. However the conclusions are confined to the peculiarities of the available sample and are not easily exportable to alternative periods or allow any generalizations.
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