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

29 Pages Posted: 9 Mar 2016

See all articles by Simone Salotti

Simone Salotti

Oxford Brookes University

Carmine Trecroci

University of Brescia

Multiple version iconThere are 2 versions of this paper

Date Written: April 2016

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 non‐linear effects on productivity, with government debt becoming more detrimental in advanced economies when above 85–90% of GDP.

Suggested Citation

Salotti, Simone and Trecroci, Carmine, The Impact of Government Debt, Expenditure and Taxes on Aggregate Investment and Productivity Growth (April 2016). Economica, Vol. 83, Issue 330, pp. 356-384, 2016, Available at SSRN: https://ssrn.com/abstract=2745019 or http://dx.doi.org/10.1111/ecca.12175

Simone Salotti (Contact Author)

Oxford Brookes University ( email )

United Kingdom

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

Carmine Trecroci

University of Brescia ( email )

Via San Faustino 74B
Brescia, 25122
Italy

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