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Even Worse than You thought: The Impact of Public Debt on Aggregate Investment and Productivity

  • Simone Salotti
  • Carmine Trecroci

In this paper, we empirically assess the impact of government debt on two key determinants of long-term growth, i.e., private investment and productivity, on a panel of 20 OECD economies from 1970 to 2009. Our main finding is that high public debts are followed by significant and linear declines of both aggregate investment spending and productivity growth. Our analysis also finds evidence supporting conditional convergence of productivity growth among OECD countries.

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File URL: http://degit.sam.sdu.dk/papers/degit_17/C017_020.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c017_020.

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Length: 23 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:deg:conpap:c017_020
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  12. Margarita Katsimi & Vassilis Sarantides, 2009. "The Impact of Fiscal Policy on Profits," CESifo Working Paper Series 2849, CESifo Group Munich.
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  28. Mas, Matilde & Milana, Carlo & Serrano, Lorenzo, 2008. "Spain and Italy: Catching up and falling behind. Two different tales of productivity slowdown," MPRA Paper 15834, University Library of Munich, Germany, revised 2008.
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