This paper employ a structural threshold regression methodology to investigate the heterogeneous effects of debt on growth using public debt as a threshold variable as well as several other plausible variables. The methodology allows us to address three sources of model uncertainty that characterize cross-country growth data: parameter heterogeneity, theory uncertainty, and endogeneity. In this paper there is a strong evidence for threshold effects based on democracy, which implies that higher public debt results in lower growth for countries in the Low-Democracy regime. The results are consistent with the presence of parameter heterogeneity in the cross-country growth process due to fundamental determinants of economic growth proposed by the new growth theories.