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Public Debt, Corruption and Sustainable Economic Growth

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  • Eunji Kim

    () (Gender Budget Research Center, Korea Women’s Development Institute, Seoul 03367, Korea)

  • Yoonhee Ha

    () (Graduate School of Energy and Environment, Korea University, Seoul 02841, Korea)

  • Sangheon Kim

    () (Graduate School of Public Administration and the Korea Institute of Public Affairs, Seoul National University, Seoul 08826, Korea)

Abstract

There are many studies that look into the relationship between public debt and economic growth. It is hard to find, however, research addressing the role of corruption between these two variables. Noticing this vacancy in current literature, we strive to investigate the effect of corruption on the relationship between public debt and economic growth. For this purpose, the pooled ordinary least squares (OLS), fixed effects models and the dynamic panel generalized method of moments (GMM) models (Arellano-Bond, 1991) are estimated with data of 77 countries from 1990 to 2014. The empirical results show that the interaction term between public debt and corruption is statistically significant. This confirms the hypothesis that the effect of public debt on economic growth is a function of corruption. The sign of the marginal effect is negative in corrupt countries, but public debt enhances economic growth within countries that are not corrupt, i.e., highly transparent.

Suggested Citation

  • Eunji Kim & Yoonhee Ha & Sangheon Kim, 2017. "Public Debt, Corruption and Sustainable Economic Growth," Sustainability, MDPI, Open Access Journal, vol. 9(3), pages 1-30, March.
  • Handle: RePEc:gam:jsusta:v:9:y:2017:i:3:p:433-:d:93140
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    More about this item

    Keywords

    public debt; economic growth; corruption; institution;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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