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Is government debt good or bad for labor productivity? A dynamic panel analysis over 1972-2019

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  • Carvelli, Gianni
  • Trecroci, Carmine

Abstract

In this paper we provide new insights on the nexus between public debt and economic growth, focusing on the growth of debt rather than its level. By exploiting updated macroeconomic time series for 75 countries (37 OECD and 38 non-OECD) over the period 1972-2019 and using the system-GMM technique, we estimate the impact of the growth of public debt per worker on labor productivity growth. We find evidence of a significant adverse effect of the growth of public debt per worker on labor productivity growth, as proxied by the growth of output per worker. Similar results arise when we consider the growth of public debt per capita and the growth of real GDP per hours worked.

Suggested Citation

  • Carvelli, Gianni & Trecroci, Carmine, 2021. "Is government debt good or bad for labor productivity? A dynamic panel analysis over 1972-2019," MPRA Paper 108314, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:108314
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    References listed on IDEAS

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    Cited by:

    1. D'Andrea, Sara, 2023. "Innovation, Public Debt and Monetization: an Empirical Analysis," MPRA Paper 117520, University Library of Munich, Germany.

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    More about this item

    Keywords

    Public debt; Labor productivity; Growth.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • 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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