Publication:
Distributional Crowding Out Effects of Public Debt on Private Investment in Developing Economies

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dc.contributor.authorIslam, Asif M.
dc.contributor.authorNguyen, Ha
dc.date.accessioned2024-06-03T21:31:05Z
dc.date.available2024-06-03T21:31:05Z
dc.date.issued2024-06-03
dc.description.abstractThe Covid-19 pandemic, followed by financial tightening due inflationary pressure, has raised public debt in developing economies as governments grapple with public health investments to curb the pandemic and collapse in revenues due to slower economic activity. The rise in debt may further disrupt the formal private sector in developing economies. Using two to three waves of panel firm-level data across developing economies, this study finds that higher public debt is correlated with low investment by formal private sector firms. The finding is largely driven by small and medium-size enterprises, domestic firms, and non-exporters — raising concerns about the distributional impacts. Potential channels are uncovered. High levels of debt reduced the accessibility of finance for private sector firms, limiting investment. Furthermore, a regulatory channel is observed. As public debt rises, firms spend more time with regulatory and tax officials, which is possibly indicative of higher efforts of governments to raise revenues. This channel is stronger for small and medium-size enterprises.en
dc.identifierhttp://documents.worldbank.org/curated/en/099526006032434145/IDU1ad2aa24f14bf51412319d95146fbb4e9bcee
dc.identifier.doi10.1596/1813-9450-10786
dc.identifier.urihttps://hdl.handle.net/10986/41650
dc.languageEnglish
dc.language.isoen_US
dc.publisherWashington, DC: World Bank
dc.relation.ispartofseriesPolicy Research Working Paper; 10786
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectPUBLIC DEBT
dc.subjectPRIVATE INVESTMENT
dc.subjectFORMAL FIRMS
dc.subjectDEVELOPING ECONOMIES
dc.subjectDECENT WORK AND ECONOMIC GROWTH
dc.subjectSDG 8
dc.titleDistributional Crowding Out Effects of Public Debt on Private Investment in Developing Economiesen
dc.typeWorking Paper
dspace.entity.typePublication
okr.crossref.titleDistributional Crowding Out Effects of Public Debt on Private Investment in Developing Economies
okr.date.disclosure2024-06-03
okr.date.doiregistration2025-04-23T02:23:24.367108Z
okr.date.lastmodified2024-06-03T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099526006032434145/IDU1ad2aa24f14bf51412319d95146fbb4e9bcee
okr.guid099526006032434145
okr.identifier.docmidIDU-ad2aa24f-4bf5-4123-9d95-46fbb4e9bcee
okr.identifier.doi10.1596/1813-9450-10786
okr.identifier.doihttps://doi.org/10.1596/1813-9450-10786
okr.identifier.externaldocumentum34332532
okr.identifier.internaldocumentum34332532
okr.identifier.reportWPS10786
okr.import.id4364
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099526006032434145/pdf/IDU1ad2aa24f14bf51412319d95146fbb4e9bcee.pdfen
okr.region.geographicalWorld
okr.topicFinance and Financial Sector Development::Strategic Debt Management
okr.topicPrivate Sector Development::Private Sector Economics
okr.topicMacroeconomics and Economic Growth::Development Economics & Aid Effectiveness
okr.unitOffice of the Chief Economist (MNACE)
okr.volume1
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