ABSTRACT
This chapter investigates the relationship between genuine savings and public debt, and confirms the large effect of public debt on the indicator. It focuses on the concept of inclusive wealth, which is the weighted sum of all types of capital, as a source of well-being. The chapter also focuses on the relationships between volatility and the various types of accumulated capital. It discusses the effect of public debt on a sustainability indicator. The chapter analyzes the empirical effect of public debt on a sustainability indicator by the ARCH-M model. It discusses the empirical method to investigate the relationship between public debt and inclusive wealth. The chapter considers both direct and indirect effects; the direct effect is the contribution of public debt to the inclusive wealth accumulation and the indirect effect is via volatility stabilization. Inevitably, without enough reinvestment into productive capital, such as man-made capital and human capital, the inclusive wealth decreases.
