Government debt and household wealth inequality: evidence from China

Abstract

This study attempts to explain the relationship between government debt and household wealth inequality, and further discusses possible channels of influence to provide ideas for mitigating the increasing gap between rich and poor. This study puts forward relevant assumptions in the theoretical model, further analyses the composition of household wealth, and verifies that household housing investment is an essential factor. This study finds that the expansion of government debt raises the price of housing, leading to faster wealth growth for wealthy households with relatively more real estate and widening the gap between rich and poor. This study argues that in economic development, government debt should be tilted towards livelihood protection and infrastructure construction, providing guaranteed housing to eligible relatively poor and narrowing the gap between rich and poor to a reasonable extent.