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External debt, state ownership and technical efficiency: A stochastic frontier analysis of emerging economies

Author

Listed:
  • Woon Kan Yap

    (Universiti Tun Abdul Razak)

  • Fakarudin Kamarudin

    (Universiti Putra Malaysia)

  • Jenny Gryzelius

    (Universiti Tun Abdul Razak)

Abstract

Arguing that the litmus test of external debt sustainability should be based on total factor productivity growth instead of mere GDP growth, this study examines the effect of external debt on total factor productivity through technical efficiency change using the Stochastic Frontier Analysis method. To deepen the analysis, the dynamics of technical efficiency, public sector external debt and state ownership are also investigated in this study. The results show that external debt of the private sector increases total factor productivity by improving technical efficiency, whereas the contrary is true with regard to external debt of the public sector. Hence, between the public and private sectors, the latter shows greater efficiency in allocating and using external debt. Nonetheless, the negative impact of public sector external debt on technical efficiency can be mitigated by transferring state-owned assets to the private sector through privatization.

Suggested Citation

  • Woon Kan Yap & Fakarudin Kamarudin & Jenny Gryzelius, 2025. "External debt, state ownership and technical efficiency: A stochastic frontier analysis of emerging economies," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 24(1), pages 123-150, January.
    • Handle: RePEc:spr:portec:v:24:y:2025:i:1:d:10.1007_s10258-024-00255-8
    DOI: 10.1007/s10258-024-00255-8
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    Keywords

    External debt; State ownership; Total factor productivity; Stochastic frontier analysis;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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