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This study examines the effect of public debt on the economic growth of OECD countries by disentangling the effect into permanent and transitory components. The study covers 37 OECD countries.

The Mundlak decomposition was employed to decompose the effect of public debt into its transitory and permanent effect on economic growth. To account for potential endogeneity problem, the Hausman and Taylor estimator was employed to estimate the decomposed model. Further, the study disaggregated the OECD model into country group models for further analysis of the dynamics of the relationship between the variables.

The findings of the study reveal that in the full OECD model public debt exerts a significant negative permanent and positive transitory effect on economic growth. This was robust to alternative model specifications. The magnitude of the negative permanent effect of debt was found to be larger than the positive transitory effect. Further, the estimates of the disaggregated models reveal that though public debt has a negative permanent effect across all the country groups, it was not the case for the transitory effect of debt. Also, a net public debt model was estimated, and its effect on public debt was found to be largely insignificant, exhibiting a Ricardian-like behaviour.

To the best of our knowledge, this is the first study, particularly in the OECD context that employed the Mundlak transformation to examine the permanent versus transitory effect of public debt on economic growth.

The purpose of this paper is to raise awareness of the role of Islamic endowments (awqaf) as viable mechanisms for financing poverty alleviation programmes and the value of the third sector in promoting public welfare.

Secondary sources provided the main data for the study. These were supplemented with personal discussions and observations. Narrative approach was used for analysis.

The lack of awareness about endowments (awqaf) is a barrier to harnessing their potentials in redressing socio‐economic inequities and enhancing the quality of life of the poor in Kano.

Scholars, merchants and civil society organizations will be awakened to the need to cooperate in employing the institution of awqaf reducing poverty through the provision of quality education, better health care and employment opportunities. Government will be made aware of the need to explore non‐conventional methods in tackling poverty, recognize Islamic endowments (awqaf) as viable alternatives in financing community welfare programmes and provide all necessary policy support –legal/institutional/financial – for their smooth operation.

The worth of this paper lies in drawing the attention of stakeholders, like policy makers, and the general public to the contemporary relevance of, and demand for, Islamic endowments (awqaf) in solving many of the socio‐economic problems excluding the poor from leading a decent life.