The Impact of Government Debt, Expenditure and Taxes on Aggregate Investment and Productivity Growth

42 Pages Posted: 4 Apr 2012 Last revised: 11 Jul 2014

See all articles by Carmine Trecroci

Carmine Trecroci

University of Brescia

Simone Salotti

Oxford Brookes University

Multiple version iconThere are 2 versions of this paper

Date Written: July 10, 2014

Abstract

In this paper we evaluate empirically the impact of fiscal policy on two key determinants of long-term growth, i.e., private investment and productivity growth. We mostly focus on a panel of 20 OECD economies from 1970 to 2009, although we also present some estimates based on data for 80 developing economies. Our findings suggest that high public debt adversely affects both aggregate investment spending and productivity growth, through distortions related to the size of the public sector. We also find weak evidence of some nonlinear effects on productivity, with government debt becoming more detrimental when above 85-90% of GDP in advanded economies.

Keywords: government debt, economic growth, investment, productivity

JEL Classification: O47, H63, E62

Suggested Citation

Trecroci, Carmine and Salotti, Simone, The Impact of Government Debt, Expenditure and Taxes on Aggregate Investment and Productivity Growth (July 10, 2014). Available at SSRN: https://ssrn.com/abstract=2033107 or http://dx.doi.org/10.2139/ssrn.2033107

Carmine Trecroci (Contact Author)

University of Brescia ( email )

Via San Faustino 74B
Brescia, 25122
Italy

Simone Salotti

Oxford Brookes University ( email )

United Kingdom

HOME PAGE: http://simonesalotti.wordpress.com

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