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Industrial employment and external debt sustainability: evidence from low- and middle-income countries

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  • Tung Nguyen-Thanh
  • Syed Mansoob Murshed
  • Hoai Nguyen-Trong

Abstract

Proper industrialization can improve sovereign solvency via channels of optimal industrial employment and competitive manufacturing exports. The paper finds a negative correlation between industrial employment and external debt sustainability in 77 low- and middle-income countries from 2000 to 2017. The finding reveals that sub-optimal quality of industrial labor forces and problematic allocations of labor forces in industrial sectors relative to non-industrial sectors are presented in these countries which position sovereigns’ solvency at significant risks. Additionally, results find loans from non-Paris club creditors downgrade external debt sustainability in these economies. Results are robust with alternative econometric methods and different samples.

Suggested Citation

  • Tung Nguyen-Thanh & Syed Mansoob Murshed & Hoai Nguyen-Trong, 2026. "Industrial employment and external debt sustainability: evidence from low- and middle-income countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 29(1), pages 26-49, January.
    • Handle: RePEc:taf:jpolrf:v:29:y:2026:i:1:p:26-49
    DOI: 10.1080/17487870.2025.2579829
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