Is Government Debt Good or Bad for Labor Productivity? A Dynamic Panel Analysis Over 1972-2019

7 Pages Posted: 22 Jul 2021

See all articles by Gianni Carvelli

Gianni Carvelli

University of Brescia

Carmine Trecroci

University of Brescia

Date Written: June 16, 2021

Abstract

In this paper we provide new insights on the nexus between public debt and economic growth, focusing on the growth of debt rather than its level. By exploiting updated macroeconomic time series for 75 countries (37 OECD and 38 non-OECD) over the period 1972-2019 and using the system-GMM technique, we estimate the impact of the growth of public debt per worker on labor productivity growth. We find evidence of a significant adverse effect of the growth of public debt per worker on labor productivity growth, as proxied by the growth of output per worker. Similar results arise when we consider the growth of public debt per capita and the growth of real GDP per hours worked.

Keywords: Public debt, Labor productivity, Growth.

JEL Classification: O47, H63, E62, C33

Suggested Citation

Carvelli, Gianni and Trecroci, Carmine, Is Government Debt Good or Bad for Labor Productivity? A Dynamic Panel Analysis Over 1972-2019 (June 16, 2021). Available at SSRN: https://ssrn.com/abstract=3889781 or http://dx.doi.org/10.2139/ssrn.3889781

Gianni Carvelli (Contact Author)

University of Brescia ( email )

Piazza del Mercato, 15
25122 Brescia
Italy

Carmine Trecroci

University of Brescia ( email )

Via San Faustino 74B
Brescia, 25122
Italy

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