Do higher public debt levels reduce economic growth?

Philipp Heimberger

No 74-2021, FMM Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: While the effect of higher public debt levels on economic growth has received much attention, the literature partly points to contradictory results. This paper applies meta-regression methods to 826 estimates from 48 primary studies. The unweighted mean of the reported results suggests: a 10 percentage points increase in public-debt-to-GDP is associated with a decline in annual growth rates by 0.14 percentage points, with a 95% confidence interval from 0.10 to 0.18 percentage points. However, we cannot reject a zero effect after correcting for publication bias. Furthermore, the meta-regression analysis shows that tackling endogeneity between public debt and growth makes estimates lean less towards the negative side. In testing for non-linear effects, our results do not point to a universal public-debt-to-GDP threshold beyond which growth slows: threshold estimates are sensitive to data and econometric choices. These findings imply a lack of evidence of a consistently negative growth effect of higher public-debt-to-GDP.

Keywords: Public debt; economic growth; meta-analysis (search for similar items in EconPapers)
JEL-codes: E62 F34 O11 O47 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2021
New Economics Papers: this item is included in nep-his, nep-hme, nep-mac and nep-pke
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Do higher public debt levels reduce economic growth? (2023)
Working Paper: Do Higher Public Debt Levels Reduce Economic Growth? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:imk:fmmpap:74-2021

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