Title
Public debt, economic growth, and public sector management in developing countries : is there a link? Public debt, economic growth, and public sector management in developing countries : is there a link?
Author
Faculty/Department
Institute of Development Policy and Management
Publication type
article
Publication
Chichester ,
Subject
Economics
Law
Source (journal)
Public administration and development. - Chichester
Volume/pages
35(2015) :5 , p. 329-346
ISSN
0271-2075
ISI
000369860000001
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
The article investigates whether differences in public sector management quality affect the link between public debt and economic growth in developing countries. For this purpose, we primarily use the World Bank's institutional indices of public sector management (PSM). Using PSM thresholds, we split our panel into country clusters and make comparisons. Our linear baseline regressions reveal a significant negative relationship between public debt and growth. The various robustness exercises that we perform also confirm these results. When we dissect our data set into weak and strong county clusters using public sector management scores, however, we find different results. While public debt still displayed a negative relationship with growth in countries with weak public sector management quality, it generally displayed a positive relationship in the latter group. The tests for non-linearity shows evidence of an inverse-U-shape relationship between public debt and economic growth. However, we fail to see a similar significant relationship on country clusters that account for PSM quality. Yet, countries with well-managed public sectors demonstrate a higher public debt sustainability threshold. Copyright (c) 2015 John Wiley & Sons, Ltd.
E-info
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