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Public Debt, Corruption and Sustainable Economic Growth

Eunji Kim, Yoonhee Ha and Sangheon Kim
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Eunji Kim: Gender Budget Research Center, Korea Women’s Development Institute, Seoul 03367, Korea
Yoonhee Ha: Graduate School of Energy and Environment, Korea University, Seoul 02841, Korea
Sangheon Kim: Graduate School of Public Administration and the Korea Institute of Public Affairs, Seoul National University, Seoul 08826, Korea

Sustainability, 2017, vol. 9, issue 3, 1-30

Abstract: There are many studies that look into the relationship between public debt and economic growth. It is hard to find, however, research addressing the role of corruption between these two variables. Noticing this vacancy in current literature, we strive to investigate the effect of corruption on the relationship between public debt and economic growth. For this purpose, the pooled ordinary least squares (OLS), fixed effects models and the dynamic panel generalized method of moments (GMM) models (Arellano-Bond, 1991) are estimated with data of 77 countries from 1990 to 2014. The empirical results show that the interaction term between public debt and corruption is statistically significant. This confirms the hypothesis that the effect of public debt on economic growth is a function of corruption. The sign of the marginal effect is negative in corrupt countries, but public debt enhances economic growth within countries that are not corrupt, i.e., highly transparent.

Keywords: public debt; economic growth; corruption; institution (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (29)

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