Theoretical and Applied Economics
No. 1 / 2021 (626), Spring
Debt-financed public investment in developing countries: Does the efficiency of public investment matter?
Lincoln University, New Zealand
Abstract. Public investment is central to implementing the UN 2030 Agenda for Sustainable Development – but persistent levels of high public debt without sufficient debt-servicing capacity poses serious risks. This study examines whether government spending efficiency is associated with differential effects of public investment on debt-to-GDP ratio for a panel data consisting of 16 developing countries in Asia-Pacific region over the period 2007-2017. The empirical results indicate that public investment efficiency moderates debt-to-GDP ratio whereas public investment in the midst of public sector corruption accentuates debt-to-GDP ratio. The results have important policy implications.
Keywords: public debt, government spending efficiency, public investment, public sector corruption.
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Contents
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