Structural change and public debt dynamics

Nandu Sasidharan ()

Department of Economics University of Siena from Department of Economics, University of Siena

Abstract: This paper presents a behavioural macro-dynamic model to study the relationship between informality, structural change, and public debt. Building on a structuralist framework, I innovate by using discrete choice theory to address the probability of workers being formal or informal. The formal sector combines manufacturing and business activities, while informality refers to the non-business low-productivity sector. It is shown analytically and through numerical simulations that when capital accumulation (g) is greater than interest rates (i), the unique equilibrium point is stable and formalisation implies higher debt. Reducing informality and public debt is possible only when i

Keywords: Structural change; Dual economies; Informality; Public debt; Fiscal policy Jel Classification: O11, 017, E62, 041, E6 (search for similar items in EconPapers)
Date: 2025-03
New Economics Papers: this item is included in nep-iue
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Persistent link: https://EconPapers.repec.org/RePEc:usi:wpaper:925

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