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Public debt concentrated in advanced economies, MIT student’s research finds

Global financial crisis highlights gulf between advanced and emerging nations.
The global financial crisis has sharply increased public debt levels, especially in the world’s advanced economies, according to a survey co-authored by MIT junior Mengjie Ding, and published online in the Financial Times on Monday.

The survey underscores the different economic scenarios faced by many advanced industrial states in comparison to countries in the developing world, where growth rates are higher and debt burdens lower.

The ratio of world debt to world gross domestic product rose to 59 percent in 2010 from 44 percent in 2007, according to the study. In advanced economies, the debt ratio has risen to 71 percent in 2010 from 48 percent in 2007; in emerging economies, it is holding steady at 30 percent.

An article accompanying the survey, appearing in the “Economists’ Forum” of the Financial Times, was co-authored by Eswar Prasad, a professor at Cornell University and a senior fellow at the Brookings Institution, and Ding, who helped research the issue along with Prasad while serving as an intern at Brookings last summer. Ding is majoring in economics and mathematics.

While larger economies “can of course afford more debt,” as the authors note, the survey “highlights the growing gulf” between advanced economies and developing nations. The piece and accompanying data are also publicly available through the Brookings Institution.

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