Report
Could public debt be the cause of the productivity slowdown?
The weight of public debt in total debt has risen sharply since the late 1990s. We seek to determine whether this is one of the causes of the slowdown in productivity (we look at the United States, the euro zone, the United Kingdom and Japan). The mechanism would be as follows: savings used to finance public debt are used less efficiently than those used to finance companies or households. Public debt is mainly used for public spending on transfer payments and wages; private debt is used for corporate and housing investment. The increase in the proportion of public debt in total debt then implies that savings generate less productivity gains. This situation may change if the structure of public spending changes in the future, with an increase in investment spending linked to the energy transition and reindustrialisation, and an increase in spending on education and vocational training.
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