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Structural change and public debt dynamics

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  • Nandu Sasidharan

Abstract

This paper presents a behavioural macro-dynamic model to study the relationship between informality, structural change, and public debt. Building on a structuralist framework, I innovate by using discrete choice theory to address the probability of workers being formal or informal. The formal sector combines manufacturing and business activities, while informality refers to the non-business low-productivity sector. It is shown analytically and through numerical simulations that when capital accumulation (g) is greater than interest rates (i), the unique equilibrium point is stable and formalisation implies higher debt. Reducing informality and public debt is possible only when i

Suggested Citation

  • Nandu Sasidharan, 2025. "Structural change and public debt dynamics," Department of Economics University of Siena 925, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:925
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    File URL: http://repec.deps.unisi.it/quaderni/925.pdf
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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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