Supplementary data for: "Optimal Public Debt with Life Cycle Motives"

This paper determines optimal public debt in a life cycle model with
incomplete markets that matches the empirically observed variation in
consumption, labor and savings, both in the cross section of U.S.
households and by age. We find that public savings, not public debt,
equal to 168% of output is optimal, primarily due to the influence of
the life cycle on household decision-making. By inducing a lower
interest rate, public savings slows the empirically observed rate of
consumption and leisure growth over an average household's lifetime, and
the resulting flatter allocation of lifetime consumption and leisure
improves welfare. We show that when including the life cycle these
welfare benefits are large; so large that, on net, they outweigh the
transitional costs from a tax-financed public debt elimination. <br>