The question is taken up of whether government debt worsens the distribution of income as tax revenues from workers are used to pay for the interest on the debt held by the rich. In so doing, a post-Keynesian model is developed in which growth is determined by aggregate demand rather than by the supply of resources and income is distributed between workers who earn wages and capitalists who receive profit and interest income. The analysis highlights the possible expansionary effect of a rise in government debt which may raise the income of the workers, and it shows that its precise effect on income inequality depends on circumstances under which government debt rises.
