Is Government Debt Good or Bad for Labor Productivity? A Dynamic Panel Analysis Over 1972-2019
7 Pages Posted: 22 Jul 2021
Date Written: June 16, 2021
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
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