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Public Debt, Corruption and Growth: Are There Any Threshold Effects?

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  • Ali Benabdennour

    (University of Gabes. Tunisia)

Abstract

Adopting a Panel Threshold Regression (PTR) model, for 96 countries during the period 2010-2019, we propose to verify that the public debt-corruption-growth nexus is non-linear. The stylized facts show that growth starts to increase with debt and then it decreases. Remarkable differences are observed between high-income countries and low and middle-income countries in debt, corruption, and growth. For the whole sample, as well as for the two subsamples of high-income countries and low and middle-income countries, the results estimate thresholds associated to debt and to control of corruption that separate different growth regimes. Debt is a lever only if its level is low and/or control of corruption is high. The latter is estimated to have limited (for entire sample) and retarded (for high-income countries) the negative effects of debt on growth. Thus, for pro-growth debt, it is necessary to control debt and fight corruption. These factors contribute to canalize financial resources towards productive activities, to reduce uncertainty about the future and to stimulate capital accumulation.

Suggested Citation

  • Ali Benabdennour, 2025. "Public Debt, Corruption and Growth: Are There Any Threshold Effects?," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 50(3), pages 103-121, September.
    • Handle: RePEc:ris:jecdev:021631
    DOI: 10.35866/caujed.2024.50.3.005
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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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