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Public Debt Levels and Corruption in High-Income Economies
This paper proposes a possible explanation of different government debt levels observed in developed economies. It builds a model that relates the level of government debt to the degree of corruptness of the public officials in the country. Public corruption results in higher public debt levels in the steady state. The model explains about 40% of variation in debt to GDP levels in a sample of 23 high-income countries, given the measure of public corruption, public spending and GDP in these countries.