Public debt, inequality and economic growth

The project aims to bring attention to wealth inequality, an aspect often neglected in empirical analyses due to a lack of adequate data. Taking advantage of recent advances, particularly for the United States, I extended a study traditionally focused on income distribution to the link between public debt and wealth inequality. Considering the strong link between wealth and public debt, mediated by government bonds and portfolio choices, I explored the interdependence between these two phenomena. For the analysis, I used the VEC model, which allows us to examine both short- and long-run dynamics, testing causality and transmission mechanisms between variables. Moreover, since there was no suitable package in R for this type of analysis, I developed a specific tool. A chapter of the project was dedicated to the description of the package: structure, main functionalities and comparison with other existing tools. The results of the analysis show that there is a link from public debt to wealth inequality, but not the other way around. However, indirect forms of interdependence emerge through fiscal policy choices. Moreover, the long-run relationship between public debt and inequality proves to be significant, profoundly influencing the latter. A second empirical study, conducted as part of the project, focused on two objectives: analysing the impact of income distribution on economic growth; investigating the impact of debt distribution on the distribution of income; and analysing the impact of debt distribution on the distribution of wealth. The results show that inequality within the three segments into which the income distribution was divided has a negative impact on growth. In contrast, inequality between the segments has a positive effect. The whole inequality. Overall inequality, on the other hand, impacts negatively on the income growth of the poorer population, and positively on the richer population.