Death, Birth, Productivity Growth and Debt Neutrality

This paper reconsiders the necessary and sufficient conditions for debt neutrality. There is debt neutrality if, given a pro gram for public expenditure on current goods and services over time, the real equilibrium of the economy is not affected by a change in th e pattern of lump-sum taxes over time. If there is debt neutrality fo r instance, the substitution of borrowing today for lump-sum taxation today (followed by such further changes in the time path of future l ump-sum taxes as are required for maintaining government solvency) do es not affect the current and future behavior of private consumption and capital formation.