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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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  17. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
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  34. Afonso, António & Jalles, João Tovar, 2013. "Growth and productivity: The role of government debt," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 384-407.
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