This paper investigates the role of the institutional framework in the accumulation of central government debt. We employ the Economic Freedom Index (EFI) as a proxy for institutional framework and study the causal link between institutions that promote economic freedom and the creation of public debt. The results presented in this paper are the evidence of a direct causal link between institutions and debt ratios. They suggest that not only the institutional and structural framework of economies matter in public debt accumulation, but also show that countries with higher institutional scores are less likely to accumulate high levels of public debt. In particular, a 10-point increase in the economic freedom score, on average, reduces a country’s debt stock by 7 percentage points. Government size plays a major role in debt reduction, but it does so in different ways across corresponding samples. Developing countries can more effectively reduce debt through a cutback on the tax burden, whereas developed countries are more likely to do so with policy oriented in reducing government spending. We also find evidence on the importance of legal institutions in developed countries, especially in the forms of enforcement of property rights and judicial corruption, in determining levels of government debt.

This paper investigates the role of the institutional framework in the accumulation of central government debt. We employ the Economic Freedom Index (EFI) as a proxy for institutional framework and study the causal link between institutions that promote economic freedom and the creation of public debt. The results presented in this paper are evidence of causality between institutions and debt-to-GDP ratios. This paper suggests that institutional and structural frameworks of economies bear great importance in public debt accumulation. The countries that score better on the quality of economic institutions are more likely to accrue lower levels of public debt. In particular, a 10-point enhancement in the EFI score can lead to reductions between 1.7 and 7.3 percentage points in debt-to-GDP ratios. We also observed that scores for open markets and government size affect public debt negatively across developed as well as developing countries. Additionally, the evidence suggests that countries deemed less likely to expropriate private property exhibit higher percentage of government debt relative to GDP. We stipulate this is the result of higher perceived trustworthiness which in turn leads to an increased pool of available credit.

This paper estimates Italy’s labor market flows between 1921 and 1940 by exploiting evidence from three population censuses in 1921, 1931 and 1936. We compute historical series for the working-age population, inactive population, labor force and unemployed individuals. Further, we estimate seasonal agricultural workers to obtain a new unemployment series. We also estimate all labor market flows and series by gender in order to shed light on gender-based differences in labor outcomes in this period. Our estimates show that the Italian interwar period was characterized by falling labor participation and large increases in inactivity, primarily driven by women leaving the labor force. Our estimates are also reassessing the evolution of unemployment in the 1920s and 1930s. Unemployment rates were fairly high during the 1920s, with almost a third of unemployment made up of agricultural seasonal workers. Following the Great Depression, unemployment rates fell considerably due to the outflow of workers from the labor force. Finally, we estimate significant gender differences in labor market outcomes while both male and female participation and unemployment rates experience long-term negative trends.