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date: 11 December 2019

Abstract and Keywords

This chapter investigates the link between the government debt-to-GDP ratio and real per capita income growth in Italy over 1861-2007. By estimation of a standard production function, we find support for the hypotheses of a negative relation between the two variables which appears to work mainly through reduced investment. A descriptive analysis of fiscal policy in 1880-1914 (when the negative correlation between the two variables is particularly strong) and 1985-2007 (when the correlation appears to break down when debt starts declining) suggests that differences in the timing of fiscal consolidation, as well as in the size and composition of the budget, are additional significant explanatory factors.

Keywords: public debt, economic growth, Italian economic history

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